The Listen to Lawrence Letter: Trusts and Social Security Numbers

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 use one of the trustee’s?

MY RESPONSE:

Picking the right tax ID number is one of the first decisions we face with a trust, and we have to get it right, but in this case, it’s easy.

Depending on how and when we set up the trust, we often have a choice over which tax ID number to use, but in the typical 3rd party irrevocable Special Needs Trust, it needs its own tax ID number. Do not use the trustee’s Social Security number.

The trustee controls the trust, but the trust is still its own animal.

The IRS treats THIS trust as a separate entity. If you start using someone’s Social Security number, you’re mixing things that shouldn’t be mixed. That’s when reporting gets messy, and problems start. And dealing with the IRS is not where you want confusion.

So for your daughter’s trust, it gets its own number. Period.

We get these tax ID numbers for our clients so it’s done right from the start. It is a small step, but getting this right early avoids bigger problems later.

And, if anyone you know would like to

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tell them to send their email address to info@davidowlaw.com and I’ll add them to the list!

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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