A trust needs to have a tax identification number, and most use an Employee Identification Number (EIN) for the purpose. Lawyers customarily get them online within minutes. Now it seems that estate planners who wait until after Boxing Day on Dec. 26 to apply for the numbers will be out of luck.
If you delayed the setup of a trust and funded it with tax-free gifts before the end of the year, you may just be out of luck. The IRS website states there will be a “Planned Outage” for submitting tax identification applications from December 27, 2012 to January 2, 2013.
A Forbes recent article, “IRS Is Grinch Who Stole Tax ID Numbers,” explains how trusts are taxable entities and need a tax identification number – most estate planners use an Employer Identification Number (EIN). In most situations, the online application found on the IRS website can be completed in a matter of minutes. A notice posted on the IRS website, however, states that the online EIN application will be unavailable beginning 4:00 p.m. EST on Thursday, December 27, 2012 until approximately 6:00 a.m. EST on Wednesday, January 2, 2013.
A possible way around this latest snag is to form a grantor trust – a trust in which the person who creates the trust, the grantor, retains certain rights or powers. A grantor trust is not treated as a separate entity for income tax purposes and therefore, the grantor’s social security number can be used to form the trust.
One downside to a grantor trust is that the grantor, rather than the trust or its beneficiaries, must pay taxes on any trust earnings. But the grantor can limit any taxes due by releasing the grantor trust powers and applying for an EIN when they are available January 2, 2013.
Reference: Forbes (December 23, 2012) “IRS Is Grinch Who Stole Tax ID Numbers”