3 Trust Administration Mistakes!
THE RIGHT WAY TO OBTAIN A TAX ID NUMBER
If you’re named as the Successor Trustee of someone else’s Trust, one of your responsibilities when they pass away will be obtaining the Tax ID Number for their Trust. Going online, completing a 15-minute questionnaire, and getting a nine-digit number from the IRS sounds simple, right? Not necessarily. In my experience, almost everyone who tries to obtain a Tax ID Number without expert guidance from an estate planning attorney does it incorrectly. This can create a mess because it triggers a complicated correction process with the IRS that can take weeks to resolve. That’s why I’m writing to you today! In this article, you’ll find three common mistakes Successor Trustees make during this process and how you (and one day, your Successor Trustee) can avoid them. Mistake No. 1 deals with why you are requesting the Tax ID Number — This is a multiple-choice question and one of the answers is for an “Estate.” Many people choose this answer because it seems logical, but it’s actually incorrect. If you select “Estate,” the IRS will think you’re asking for the number as part of a probate case. Instead, you should choose the option for “Trusts.” Mistake No. 2 is choosing the wrong answer to the question, ‘When was this Trust funded?’ — This question is incredibly misleading. Most people assume the IRS is looking for the date the Trust was set up. After all, you fund your Trust in the process of creating it, right? That’s correct, but that’s not the response the IRS wants. They actually want to know when the need for the trust Tax ID Number became necessary. In this case, that’s the date of death of the Trustmaker (the person who created the Trust). So, to avoid
this mistake, answer the question with the date of death — even though it makes no sense!
Mistake No. 3 is choosing the wrong answer to the question, ‘Who is the responsible party?’ — Most people assume that because they are now the Trustee of the Trust, they are the responsible party. That makes sense, right? Of course, it does, but again it’s not the answer the IRS is looking for. They actually want to know the name of the person who created the Trust and recently passed away. To avoid this mistake, respond with their name and information, not yours. Avoiding these three mistakes can be very helpful when obtaining a Tax ID Number. But many of the questions on that 15-minute questionnaire can be tricky, not just those three! With that in mind, we do NOT recommend trying to complete the process yourself. Odds are you’ll make an error and trigger a complicated process with the IRS. To avoid that, call us right away if you need a Tax ID Number and tell your Successor Trustee to do the same when you pass. We’ll get the questionnaire done right the first time. If you’ve already tried getting a Tax ID Number for a friend or family member’s Trust and run into problems, you can call us, too. We’ll help you navigate the cancellation process and get the correct number as soon as possible. – JMPreston
2 PrestonEstatePlanning.com
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