A trust entity is a structure that a trustee can use to carry out business on behalf of an individual to administer, manage, and transfer assets to beneficiaries. The trustee can be a person or a business. Many people create trusts so that they can transfer property or money to beneficiaries without probate. Trusts are also a great way to increase privacy, avoid estate taxes, and protect property from creditors. If you have more questions about how trusts work or how to handle taxes for a trust, keep reading.
Two Types of Trusts
There are two different types of trusts:
- Revocable trust: This trust includes provisions that may be changed or terminated by the grantor (the person who creates the trust).
- Irrevocable trust: A trust that can’t be terminated or modified unless there is permission given by the beneficiaries. When a grantor creates this type of trust, he or she gives up ownership rights to the assets inside of it.
No matter which type of trust is established, there are advantages for liability, assets, and income distribution.
Paying Taxes for a Trust
If you’re a trustee, you have a lot of responsibilities. You must pay the expenses incurred while administering the trust. These costs may include trustees’ fees, accounting fees, and taxes. If you are administering a revocable trust, you will use the grantor’s Social Security number for tax identification purposes. However, a separate tax identification number such as an EIN is required for irrevocable trusts.
Administering a trust and obtaining a tax ID number for it can be confusing. But with IRS-EIN-Tax-ID Filing Service, you can easily apply for a trust tax ID number online. If you need to find the existing number, you can conduct a tax ID number lookup. If you have more questions about trusts and taxes, contact the team at IRS-EIN-Tax-ID Filing Service for answers.