To understand what a trust tax ID is, you must first understand what a trust is. A trust is a legal arrangement that controls property or money. In order for the person who receives the trust to use the property or money, he or she must first follow particular rules. The rules vary depending on the situation, but may include one or more situations.
- The recipient must reach a certain age
- The recipient must graduate high school or college
- The recipient must have reached some other milestone
A trust provides benefits such as increases privacy, protection of personal legacy and overall greater control. It is made up of three parts, including the principal, the principal’s earned interest or dividends and the interest.
Why Would a Trust Need a Federal Tax ID?
Whether your trust requires a trust tax ID number depends on the type of trust it is. A revocable trust, which may also be known as a living trust, includes provisions that the grantor can change or cancel. This type of trust is identified by the grantor’s social security number, and the grantor must report its income on his or her tax return. The other type of trust, known as an irrevocable trust, cannot be changed or terminated unless the beneficiary grants permission. The grantor removes rights of ownership upon transfer. For this reason, an irrevocable trust requires a federal tax ID number, which you can obtain through IRS-EIN-Tax-ID.
How to Obtain a Federal Tax ID for a Trust
To receive a tax ID for a trust, you must complete an application. Available online, a tax ID application requires you to provide information about yourself and the trust. The application walks you through each question to ensure you answer everything correctly. Once you apply for your EIN number in Colorado or any other state, you should receive a response in a matter of a few days. To learn more, contact IRS EIN Tax ID Filing Service.