The Listen to Lawrence Letter: A trust tax ID# number question

CLIENT QUESTION:

We have a Special Needs trust for our daughter, and our wills were written up by your firm. When we fund it, does it need to have its own Social Security number, or can it be one of the trustee’s? Looking forward to hearing back.

MY RESPONSE:

I am going to assume that we created a stand-alone third-party Special Needs Trust for your daughter. If the trust was revocable by you during your lifetime, then you could use your own Social Security number for the trust. All revocable trusts use your own Social Security number rather than a formal separate tax ID# for the trust. On the other hand, if the trust is a typical irrevocable trust for the sole benefit of your daughter, then the trust is considered an independent taxpayer and must obtain its own tax ID# number. It should never be the Social Security number of the trustee.

The above are the general rules, but note that trust language can be manipulated to alter who should pay the tax and thus whose tax ID# is necessary…but never the trustee’s Social Security number.

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As always, please send your questions in! If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.

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