IBA Compliance Connection

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We have a certificate of deposit (CD) held by a grantor trust (our bank is not serving as trustee). When the account was set up, we used the grantor/customer’s social security number. The trust recently was amended to replace the original trustee (the grantor/customer) with his daughter as trustee. The daughter wants us to retitle the account and does not want to obtain an EIN for the trust. Can we retitle a trust account without obtaining an EIN?

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Yes, we believe that your bank may retitle this trust account without requiring an employer identification number (EIN), provided that the trust will continue to file an individual tax return (Form 1040) using the grantor’s social security number (SSN).

Generally, the IRS does not require a trust to obtain an EIN if it is a “grantor trust,” which is a type of revocable trust that provides a SSN on an individual tax return (Form 1040), rather than providing an EIN on a trust tax return (Form 1041). Assuming that this trust will remain a grantor trust after the change in trustee, it is unnecessary to obtain an EIN when retitling the account to reflect the change in trustee.

For resources related to our guidance, please see:

  • Was created in a tax year beginning on or after January 1, 1981, and
  • Meets specific criteria (see Form 1041 instructions),
  • Then: An EIN is not required, but may be assigned. Inform the grantor/trustee that he/she must:
  • Furnish his/her Social Security Number (SSN) to payers of income, and
     
  • Report all items of income, deduction, and credit from the trust on his/her Form 1040.

Note: The trust is not required to file Form 1041.”)

  • IRS, Internal Revenue Manual, Part 21.7.13, Assigning Employer Identification Numbers (EINs), Grantor Type Trusts (“A trust is a grantor trust if the grantor retains certain powers or ownership benefits . . . . In general, a grantor trust is ignored for income tax purposes and all of the income, deductions, etc., are treated as belonging directly to the grantor. This also applies to any portion of a trust that is treated as a grantor trust.”)
  • IRS, Internal Revenue Manual, Part 21.7.13, Assigning Employer Identification Numbers (EINs), Definition: Trusts (“Grantor Trust: A trust is set up by a living person or organization, or created by a will:
  • Where grantor retains certain powers or ownership benefits or
  • Is set up so that the income from the trust is taxable income of the grantor

Non-taxable grantor trusts do not report income, deductions, and credits on Form 1041, U.S. Income Tax Return for Trusts and Estates

Note: The grantor may file Form 1041 for informational purposes only.”)

  • IRS, Internal Revenue Manual, Part 21.7.13, Assigning Employer Identification Numbers (EINs), Determining the Need for an EIN: Trusts (“Note: A change of beneficiaries or trustee does not mean a new EIN is required.”)
  • Trusts and Trustees Act, 760 ILCS 5/8.5(a) (“Certification of trust. (a) Instead of furnishing a copy of the trust instrument to a person other than the beneficiary, the trustee may furnish to the person a certification of trust containing the following information: . . . .”)