Tax Identification Numbers | Minnesota Trusts and IRS

Taxes and Minnesota Trusts

Many new estate planning clients have lots of questions about taxes.  After all, who wants to pay taxes?

Mainly, people want to know how to avoid taxes when they die.  Although there are a number of tax planning “strategies” that can be discussed in every new estate planning consult, it is always the case that taxes must be tracked in a proper fasion.  This is where tax identification numbers come into play.

Income Taxes versus Estate Taxes

Most people are all-too-familiar with income taxes.  You file them every April or ask for an extension on all income earned in the prior calendar year.  That return is filed with the Internal Revenue Service (IRS) and the Minnesota Department of Revenue.  You might get a tax “return”.  You might have to pay taxes in.

Much like a persons social security number, a Minnesota trust (revocable, irrevocable, special needs, or other trust) will need its own identification number.  This tax identification number is the way the IRS keeps track of the “entity” of the trust.

Tax Identification numbers can be obtained from the IRS website.  (As an aside, this link changes relatively frequently.  Our apologies if it is not working).

An attorney will go to the website and answer a series of questions about what identification number is correct for the particular trust that is being drafted.  The most typical example is a tax identification number for a revocable trust.

As we have discussed in previous posts, a revocable trust is a stand-alone entity.  It must be “funded” in order to be valid.  Estate planning lawyers refer to the assets (money) in the trust as the trust “corpus.”  Remember, a trust is a separate legal entity – much like a Limited Liability Company or Corporation.  It exists by itself.  This is often a difficult concept for clients to understand.

When the trust attorney goes through the series of questions, he/she will pay close attention to all questions asked by the IRS.  If you do not know how to answer the IRS questions, a trust lawyer should always be consulted with.  You do not want to make a mistake on this step.

Minnesota Trusts

As discussed above, the tax identification number will need to be obtained every new Minnesota trust.  The choices give by the IRS for tax idenfication numbers are:

As you can see, the list is not all inclusive.  However, the IRS has done a good job of providing a listing of the possible trusts for a which a tax identification number could be obtained.

Minnesota Trust Attorneys

For further questions about tax identification numbers and Minnesota trusts.  Contact Joseph M. Flanders at Flanders Law Firm LLC today.  Call for your free initial consultation at 612-424-0398.