Dynasty TrustRevocable Living Trust

Do revocable trusts need an EIN or SSN in Arizona?

Do Revocable Trusts Need an EIN or SSN in Arizona?

If you create an revocable trust in Arizona do you need a tax identification number or not?

Read our blog article to understand if you need an EIN or if you can use your SSN for a revocable trust in AZ.

Creating a revocable trust has multiple implications for your family members and your assets. Trust assets will no longer be in the grantor's name and they will be part of the grantor trust. The revocable trust will be a separate entity.

When you work with an experienced estate planning attorney in AZ they will guide you through the process and tell you what needs to be added to your brand new trust, as well as what can't not be added to it. Adding properties to a trust may or may not have tax implications.

One questions that we get a lot is about the need for a new federal tax id number or not. Does a person's social security number can be used? Read our blog article to understand a little bit more about the subject.

What is a revocable trust in Chandler, Arizona?

A revocable trust is a legal arrangement where a person (the grantor or settlor) places their assets into a trust managed by a trustee for the benefit of themselves during their lifetime and for designated beneficiaries after their death. The key feature is that the grantor can modify or revoke the trust's terms and access the assets while they're alive. Trust assets can be added or removed from the grantor trust if he or she is not incapacitate. A revocable trust is a great estate planning instrument to help you manage your estate.

To learn more about revocable trusts and the laws and regulations associated with a revocable living trusts click here.

What is an EIN or Employer identification number?

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit identifier assigned by the Internal Revenue Service (IRS) to businesses, nonprofit organizations, government agencies, and other entities for tax purposes. Just like how individuals have Social Security Numbers (SSNs), entities use EINs to identify themselves when conducting various financial and tax-related activities.

Here are some key points about EINs:

1. Identification: EINs are used to identify entities for tax reporting and filing purposes. They are necessary when a business needs to open a bank account, hire employees, apply for business licenses, and file tax returns.

2. Format: EINs are composed of nine digits and are formatted as XX-XXXXXXX, where the first two digits are usually followed by a hyphen.

3. Application: Businesses and organizations can apply for an EIN through the IRS. This can be done online, by fax, by mail, or even by phone, depending on the entity's location and type.

4. Sole Proprietors: While not required, sole proprietors can also obtain an EIN for their business, even if they don't have employees. This can help separate their personal and business finances.

5. Legal and Tax Filings: EINs are used for various legal and tax-related filings, including income tax returns, payroll tax filings, and various business-related forms.

6. Nonprofit Organizations: Nonprofit organizations also require EINs for tax-exempt status applications and other filings related to their nonprofit activities.

7. Change of Ownership: If a business undergoes a change in ownership, the new owner might need to apply for a new EIN, depending on the structure of the business and the type of ownership change.

8. Privacy and Security: EINs help protect an entity's privacy, as they are used in place of the entity's name when reporting financial transactions to the IRS.

9. Free Service: Applying for an EIN is a free service provided by the IRS.

In summary, an Employer Identification Number (EIN) is a unique identifier used by businesses, organizations, and other entities for tax and financial purposes. It helps the IRS track and manage tax-related activities associated with these entities.

Do revocable trusts require an EIN ?

Revocable living trusts do not require their own Employer Identification Number (EIN) or Social Security Number (SSN) in Arizona. Typically, when you create a revocable living trust, you, as the grantor, will serve as the initial trustee, and you can use your own SSN as the trust's identification number.

A revocable living trust is considered a pass-through entity for tax purposes, meaning any income tax or deductions flow through to the grantor's individual tax return. Since the grantor's SSN is used, there is no need to obtain a separate EIN for the trust.

However, it is essential to consult with an experienced estate planning attorney or a tax professional in Arizona to confirm the latest regulations and any potential changes that may have occurred after my last update. Tax laws and regulations can change over time, so seeking professional advice will ensure you comply with the most up-to-date requirements. Estate planning attorneys follow the law and they can design the best estate planning strategy for your and your family.

What is a tax identification number or tax id number?

A Tax Identification Number (TIN), also known as an Employer Identification Number (EIN) for businesses or a Social Security Number (SSN) for individuals, is a unique identification code used by tax authorities to track and process tax-related activities and obligations.

What happens with your revocable trust after I passed away?

After your passing, the terms of your revocable trust dictate how the assets held within the trust are distributed. Typically, a revocable trust becomes irrevocable upon your death, meaning that its terms cannot be changed. For married couples the trust may become an irrevocable trust after the second spouses passes away. Sometimes the original trust may split up into a family trust and a spouses trust to guarantee the assets will stay in the bloodline in case the other spouse gets remarried.

Here's a general overview of what happens to a revocable trust after you pass away:

1. Trust Administration: The trustee, who you appointed to manage the trust, takes over the administration of the trust after your death. They are responsible for carrying out the instructions outlined in the trust document.

2. Asset Distribution: The trust document specifies how you want your assets to be distributed to your beneficiaries. The trustee follows these instructions to distribute assets according to your wishes. This can include distributing specific assets, liquidating assets and distributing the proceeds, or maintaining ongoing trusts for beneficiaries.

3. Probate Avoidance: One of the main advantages of a revocable trust is that it helps avoid the probate process, which can be time-consuming and costly. Assets held within the trust can be distributed to beneficiaries more efficiently compared to assets that go through the probate court.

4. Privacy: Unlike a will, which becomes a public record during probate, a revocable trust allows for a more private transfer of assets since trust administration occurs outside of the probate court.

5. Estate Taxes: Depending on the size of your estate and applicable tax laws, estate taxes might need to be addressed. A revocable trust can include provisions to minimize estate taxes, although it's important to consult with legal and tax professionals for guidance.

6. Trust Termination: Once all the trust's instructions have been carried out and its assets have been distributed, the trust may be terminated.

It's important to note that while a revocable trust helps streamline the distribution of assets and avoids probate, it doesn't necessarily shield those assets from estate taxes or creditors. Consulting with an attorney experienced in estate planning can help you set up a trust that aligns with your specific wishes and financial situation.

Does my revocable trust turn into an irrevocable trust after I die?

The short answer is "it depends". Typically a revocable trust becomes irrevocable after the grantor (creator) of the trust passes away, or the second spouse passes away. This means that the terms of the grantor trust cannot be changed, and the trustee must follow the instructions outlined in the trust document for distributing assets to beneficiaries.

Talk to a Trust lawyer in Chandler today.

Are you not sure if a revocable trust is right for you? Citadel law firm is here to help. Our estate planning attorneys will be pleased to offer you a free consultation. We can help you with revocable trusts, irrevocable trusts, as well as dynasty trusts.

Call (480) 565-8020 or click here to schedule a free consultation with a Wills and Trusts lawyer in Chandler, AZ.