Taxpayer Identification Number: Revocable Living Trust

Doug H. Moy
January 9, 2008 — 9,245 views  
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An interesting situation has been brought to my attention which deserves explanation regarding a trustor’s use of his or her Social Security Number as the taxpayer identification number (“TIN”) of a revocable living trust. Recently, a client (“Joe”), who receives payments from the Farm Services Agency (“FSA”) relative to real property titled in his and his wife’s names as co-trustees of their revocable living trust (“Trust”) and from land held in a life estate for Joe’s lifetime under the Last Will of Joe’s late uncle, was informed by the FSA that it would not make payments to Joe under Joe’s Social Security Number to two separate entities; namely, the Trust and the life estate. Since 1989, Joe and his wife have used Joe’s Social Security Number as the TIN for the Trust. FSA informed Joe that he would have to obtain a separate employer identification number (“EIN”) for the Trust under authority of “paragraph 364 of FSA handbook 1-PL, Rev. 1, which states: ‘A single tax identification number, such as a Social Security number, may not be used to pay both an individual and a trust in the same year.’” One of my several questions to the FSA was, “Is my understanding correct that FSA will not make payments to two entities with the same identification number; e.g., (a) the income beneficiary of a testamentary life estate under a decedent’s Last Will; and (b) the same beneficiary who is the trustor/trustee/primary beneficiary of a revocable living trust (grantor trust) where the beneficiary’s Social Security Number is the same identification number with respect to the payments made under (a) and (b)? The real property comprising the life estate established under the late uncle’s Last Will has absolutely nothing to do with Joe’s revocable living trust. That is to say, such real property is not legally owned by trustor Joe and is not a part of the trustor Joe’s revocable living trust.” My understanding was answered in the positive. The person responding to my question at the FSA replied, “My recommendation would be to obtain a tax ID number for the revocable trust.” Now, then, keep in mind that trustor Joe has not died; and his revocable living trust is still considered a grantor trust. Under federal statutes and the accompanying treasury regulations [Treas. Reg. §§ 301.6109-1(a)(2)(i)(B), 301.6109-1(b)(1) and 301.6109-1(a)(2)(i)(B) flush language (Jan. 24, 2006)], the trustor (grantor) of a revocable living trust uses his or her Social Security Number as the TIN for the trust until the trustor is either deceased or the trust is no longer a grantor trust—at which time the trustee shall then apply to the IRS for its own EIN. The Service’s response to my telephone inquiry regarding this matter was interesting. First, my correct understanding of the treasury regulations governing TINs for revocable living trusts was confirmed. Secondly, IRS employee, with whom I spoke, was most courteous and helpful in acknowledging that his office has received myriad inquiries from banks and individuals with similar factual situations. And thirdly, he informed me that it would be no problem for him to issue an EIN for the Trust. In less than five minutes, he issued an EIN for the Trust, effective January 1, 2008. Bottom line, the IRS will issue an EIN for a revocable living trust and will accept such EIN in lieu of the trustor’s Social Security Number, even though the trust is no longer a revocable living trust. Joe’s problem with the FSA has been resolved. It is interesting to note that the IRS employee, with whom I spoke, knows of no policy on the part of the IRS regarding the issue raised by the FSA and unabashedly admitted that he did not understand what all the fuss is about. Copyright © 2007, 2008 by Doug H. Moy. All rights reserved.

Doug H. Moy

Doug H. Moy is a nationally recognized author, consulting specialist, seminar instructor and educator. He has an undergraduate degree from Willamette University and a Masters degree from Washington State University. Since 1979, Mr. Moy has consulted to attorneys, tax practitioners and their clients, as well as assisted practitioners representing clients before the IRS Conference of Right and Appeals Division and Settlement Conference Negotiations. He is noted for his ability to communicate his unparalleled knowledge and experience to practitioners at all levels in his field of expertise; namely, estate/gift taxation and planning, with special expertise in living trusts; community property; lottery prize winnings; structured settlement trusts; extricating clients from abusive trust tax shelters; designing effective estate plans; and preparation of Form 706 Estate Tax Returns and 709 Gift Tax Returns. He offers particular assistance and exceptional skill designing creative, practical solutions to challenging and difficult estate planning situations.