When Should the EIN/Tax ID Be Created After the Grantor Dies With a Basic Trust? |Weekly Wednesday Wisdom Webinars

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm www.wisdomwebinar.com to register or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

In this week’s webinar, Attorney and Advisor Chris Berry of www.castlewealthlegal.com answers the below questions.

  • 0:00 Introduction / Positive Focus
  • 2:07 When should the EIN/Tax ID be created after the grantor dies with a basic trust?
  • 5:19 Is there a website to do that?
  • 5:26 If someone dies with a legacy trust, does a new EIN/Tax ID need to be created for final tax, purposes in addition to the EIN’s beneficiaries?
  • 7:28 Are there special forms/notifications needed to close a basic trust after the assets have been distributed?
  • 10:58 Does your firm assist with the probate process, for example, treasury bonds over 100k?
  • 11:39 Does your firm handle the final estate tax filings?
  • 14:39 We have what is written as an inheritance trust for our son that indicates the ages when he gets certain amounts, is this the same as a legacy trust?

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Episode Transcript

All right cool so I want to welcome everyone I wish everyone a happy thanksgiving as they’re going into thanksgiving  crossing our fingers lines don’t look too bad and all right so my name is Chris Berry with Castle Wealth Group. We do these Weekly Wisdom Webinars every week where I just answer questions either people submit ahead of time or questions you have live or bring up something that’s going on in the world of legal financial or tax planning. And I always start with a positive focus this week, my positive focus is just had a chance to my mom had her  birthday  we’ll call it her 21st birthday  took her and  my family and kids to chicago so we had a weekend in Chicago which was kind of nice. 

Went to the shed aquarium which my daughter who wants to be a marine biologist she just really enjoyed, then my son enjoyed and then we celebrated  early thanksgiving yesterday so already got some turkey because we’re going up to visit my wife’s family over thanksgiving so my positive focus is just spending time with family so it’s pretty cool now with that let’s get into the business and I’m going to share my screen  whoops hit this button there we go all right okay  so really it was just one question submitted  this week that’s kind of a big one  but if you do have questions  please make sure to put it in or if something’s unclear put it into the chat so kind of bigger question whoops all right  I just kind of put it all together so when should a tax id be created after a grantor passes away with a basic trust. 

So what we have here is so we have someone they’ve created a trust and we’ll just call it a basic trust so revocable living trust and while you’re alive and well it’s what’s called a grantor trust meaning it’s taxed at your own income tax rate so  it’s just in your own social security number and then God forbid you pass away then what needs to happen is estate administration and so what happens now is a successor trustee steps up to basically take control of the trust. And one of the first things they have to do is get a death certificate so there’s kind of two things that have to have to be done first of all is get a death certificate that’s going to come from the county or the funeral home and then the second thing with that to appoint that successor or to have that successor trustee step forward so the financial institutions know who to work with  they need a certificate of trust and that’s something that we can do  god forbid you lose a lot more okay so those these two things are always necessary now what happens is you pay off the final expenses et cetera and then you can start looking at distributing the assets but sometimes what needs to happen is we have to open up like a trust checking account and so after you pass away if there’s not already a trust checking account in existence then someone needs to get a tax id number not hard we get it for our clients. 

But you just go to irs.gov and you you can it takes about 15 minutes assuming the irs website is up and working which isn’t always the case but you have to get a tax id number  from the irs  always just a little tip always use data death or almost always use date of death as the trust existence so don’t say the tr if like the trust was done November 22 2015  and someone passes away this year you wouldn’t use the november 15th or November 20 to 2015 date for the existence of the trust because then the irs is going to think that you’ll all these like back tax returns and stuff but you need that tax id account to open up or a tax id number to open up another account  so when should the tax id be created after the grantor dies sometimes you actually don’t need one but if there isn’t already like a trust account to deposit funds into then you have to get that tax id number and that’s always something that we can help you with  is there a website so that’s kind of the first question is there a website to do that yep it’s at irs.gov. 

If someone dies with the legacy trust does a new tax id need to be created for the grantor for final tax purposes in addition to the new ins for beneficiary okay so what we’re talking about here is first a basic revocable trust just says it goes outright to the beneficiaries and then they can do whatever they want with the money what this is talking about is instead we have still a revocable living trust but we call it a legacy trust and what happens there is instead of it going outright it’s held in trust for the beneficiary so if you have two kids kind of splits into two separate shares so first you have to handle kind of the estate administration and you may or may not need a tax id number for that you may or may not like I talked about like I talked about before  if there’s already a account open or  a trust  account open then you don’t need a you might not need a tax id.

But if you do have to open up a bank account or a checking account to pay the bills and have everything kind of flow in then you might need that tax id to handle the estate administration part and then the second part is yes each one of these will need its own tax id number okay so it’s not going to be now in the social security number of the beneficiary but instead it’s going this is going to have its own tax id number  so  to answer the question yeah each so each beneficiary will need a separate tax id number so if you have two kids then there’s two beneficiaries then you need two tax id numbers so so yeah so that legacy provision or that legacy trust each needs its own tax id and again it’s not complicated it takes like 15 minutes  and if you’re working with our office obviously we can help you to get that done  are there any special forms needed to close basic trust after assets have been distributed.

So that’s done  are there special forms notifications needed to close a basic trust after the assets have been distributed  no closing a trust there’s nothing that really needs to be done  trust isn’t  here’s a question please explain the difference between a revocable living trust and a legacy trust revocable they’re both revocable living trusts it’s just how do we how do we leave things upon death one way is outright distributions so just outright at age 25 or 30 35 the other way says it’s held in trust for a lifetime so it’s just how do you leave assets upon death you can leave it outright at specific ages that avoids probate controls the distribution or you can leave it to the beneficiaries in such a way that whatever they inherit they can keep it in trust and it can be protected for their lifetime from divorces creditors bankruptcies et cetera.

So they’re both revocable living trusts the big difference is just how are you leaving things to the next generation whether it’s outright or at specific ages or with opportunity that whatever they decide to keep and trust would be protected and in that case you would need a separate tax id number for each beneficiary  okay so closing out a trust  the trust itself it’s like a suitcase so you have assets that are in the suitcase right whoops well that’s not what I want to do but so you have these assets that are in the suitcase so  let’s say we have different assets in here so we have like a checking account  we have a house we have an investment account and so someone passes away  then typically you’re paying all the bills out of the checking account  and then once all that’s done then you distribute the assets out of the trust okay and now there’s nothing left in the trust and there’s not any paperwork or anything that has to be filed to wrap up the trust it’s just empty at that point so there’s nothing no additional forms or paperwork there’s nothing that’s filed the only thing that has to happen from a tax perspective is you have to pay taxes for the deceased individual for the last year.

Like I had a family come in  today their mom passed away she was 97  and so she had her the family has to handle this last year’s tax return so they have one more tax return for their mom which will be filed next year but for it’s for from like january until november and then assuming they wrap up everything  handle the whole estate administration within a year there shouldn’t be any additional taxes so there shouldn’t be any taxes that the state has to file or anything like that so really there’s no like special forms or anything that have to be filed see if we have any questions here’s something that popped in. 

All right let me get that in a second  other special I just did that does your firm assist with the probate process yes though if there are assets going through probate  I’m not the attorney that handles that because I try to keep people out of probate I have another attorney that handles any probate and it whether it’s a simple probate of just some asset ended up going into probate and then now it has to  has to go through the probate process to find the beneficiary or if there’s a contested probate I have another attorney that works on all that  but ideally we’re avoiding probate and comments like treasury bonds bonds are just a pain to deal with I typically tell people just like try to cash them out  does your firm handle estate tax filings  yeah we have a cpa that’s affiliated with us I don’t I don’t I’m not a cpa  but we do have the  we have a cpa that would handle nasd tax filings all right so that was all the initial questions here’s a couple things that came in if you do have a question either something unclear about what we’re talking about today or anything else in the legal financial tax world  feel free to shoot put it in the Q&A.

Is it true that you need to obtain a separate ein for final tax purses after the original trustee grant of revokable trust ties or would final taxes be paid under the deceased social security number  yeah so like I said typically  you’re not going to have to file like a a trust tax return or or anything else you would just wrap up under the deceased individual social security number whatever their last year’s taxes are so in this situation that I talked about this morning their mom was 97 she had a revocable trust  she passed away  we’re managing some of the investments  the  so we’re gonna have to do her last tax return and then she gets a step up in basis on everything that wasn’t ira money so really there’s not much of a tax consequence for the kids and if we get everything wrapped up within a year  it’s not we’re not gonna have to work file any additional taxes so that’s why we try to wrap things up  relatively quickly just so that we don’t have to worry about any taxes especially paying a state or trust tax rates which are at much compressed tax rates like  oh here we go yeah.

So for example like married filing jointly to get into the 37 tax bracket you have to have over 628 thousand dollars worth of income  for an estate or trust to get into the top tax bracket of 37 percent you have to have thirteen thousand dollars there are thirteen thousand fifty thirteen thousand fifty dollars of income and then you’re in the thirty seven percent tax bracket so as much as possible we try not to have any estates or any trust paying taxes we always to do it at an individual level either under the deceased individuals tax  or under the beneficiaries  tax so  every just I’m trying to think of a situation my 16 years where we haven’t had an individual pay the tax I can’t think of any yeah so we always have a individual whether it’s a beneficiary or the deceased individual pay the taxes  so thank you for that  here’s a question  we have what is I can stop sharing my screen  we have what is written as an inheritance trust for our son that indicates the ages when he gets certain amounts is this the same as a legacy trust.

I’d say it’s the same as a basic revocable trust  in the sense that you’re making distributions at specific ages so it’s going out right at age 25 30 35. so typically we see like one-third age 25 increased to a half at age 30 the remainder at age 35. well all you’re doing is just launching like pillowcases of money over what I call the wall of time we don’t know what’s going to happen like if  your son or daughter gets divorced at 36 half that money could be lost or if they pass away all that money might go to a spouse who might remarry versus going down to potential grandchildren so when we talk and again we in the financial and legal and tax world we kind of make up our own names for things  so that what we call a legacy trust would be different than what you’re calling an inheritance trust I would call that a basic revocable trust and it’s really common when you have minor children you don’t know what’s going to happen you say okay I want to protect them from their own poor financial management protect them from making poor decisions  not while they’re minors but young adults like I remember what I was doing 18 to 25 and if I inherited 5 000 50 or 500 000 I would have been the coolest kid on campus but that would have been my only year on campus right so that’s what a basic revocable trust does when you build in those ages you’re protecting against their own poor financial mismanagement where.

Okay we’ll give you some at 25 increase to more at 30 and then the rest of 35. but the problem is what happens after that or what happens if life throws on a curveball and that’s where that legacy trust comes into play is instead of saying it goes out right at specific ages now we’re building in the opportunity so whatever we leave to the next generation is protected from divorces creditors bankruptcies and then if that individual passes away  the money doesn’t go to the in-law where typically would go it would could go down to the grandkids and be protected so a very big distinction between your typical or revocable or typical basic revocable living trust that says all right distributions at specific ages so all right  any other questions [Music] feel free to type them in give everyone a minute or two if they do have any questions all right looks like we covered everything all right so with that here you go thanks and have a happy thanksgiving yes thank you my pleasure  everyone have a great thanksgiving  we’ll be back next week I hope you have a great holiday  I sent everyone  my office home I’m still here but  everyone else is home so yeah so spend family go lines happy thanksgiving take care bye-bye.

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