Attorney Sandy Ard, of the Ard Law Firm, PLLC, writes about Estate Planning, Medicaid Planning, Veterans Benefits Planning, Wills, Trusts, Living Trusts, Pet Trusts, Special Needs Planning, Asset Protection, Elder Law, Farm Trusts and Non-citizen Spouse Estate Planning, Probate & Estate Administration, Business Succession, and Family Business Planning in Houston, Texas, and the surrounding areas.
Trust Alert! An IRS Planned Outage for Issuing Tax Identification Numbers
If you delayed the setup of a trust and funded it with tax-free gifts before the end of the year, you may just be out of luck. The IRS website states there will be a “Planned Outage” for submitting tax identification applications from December 27, 2012 to January 2, 2013.
A Forbes recent article, “IRS Is Grinch Who Stole Tax ID Numbers,” explains how trusts are taxable entities and need a tax identification number – most estate planners use an Employer Identification Number (EIN). In most situations, the online application found on the IRS website can be completed in a matter of minutes. A notice posted on the IRS website, however, states that the online EIN application will be unavailable beginning 4:00 p.m. EST on Thursday, December 27, 2012 until approximately 6:00 a.m. EST on Wednesday, January 2, 2013.
A possible way around this latest snag is to form a grantor trust – a trust in which the person who creates the trust, the grantor, retains certain rights or powers. A grantor trust is not treated as a separate entity for income tax purposes and therefore, the grantor’s social security number can be used to form the trust.
One downside to a grantor trust is that the grantor, rather than the trust or its beneficiaries, must pay taxes on any trust earnings. But the grantor can limit any taxes due by releasing the grantor trust powers and applying for an EIN when they are available January 2, 2013.
Reference: Forbes (December 23, 2012) “IRS Is Grinch Who Stole Tax ID Numbers”