What is an EIN?

Video

Good morning, folks. It’s Andy Stautz at Stautz Law. It’s casual Friday here. It’s like 95° in Indianapolis. We’re back for another quick talk about a probate topic. This one is “what is an EIN.” And this is a question that I have to answer for my probate clients after they’re appointed as a personal representative by the court.  

When do you need an EIN in probate administration?

So probate is opened, the initial filings are done, the court issues an order appointing the personal representative and directing them to administer the estate. At that point, in the court’s instructions in the case of Marion County (in Marion County, you know, there are these specific instruction documents that get issued to every personal representative by the Court. Same thing in Hamilton County, so if you’re up in Carmel, you know, Noblesville, same thing.) These instructions and my instructions, which are the same, are: obtain an EIN for the estate.  

What is an EIN?

OK, so what’s an EIN? An EIN is an employer identification number. It’s a type of taxpayer ID number that the IRS issues. So I said a taxpayer identification number. The most common one is your Social Security number. That’s for you as an individual. But if you start a business, you know the business has an existence separate from you. So it gets its own. It’s like a Social Security number for a business. It gets its own taxpayer ID.  

Why does an estate get an employer identification number?

Now, wait a minute, you might be saying, it’s called an “employer identification number.” You’re talking about businesses. What does that have to do with probate estates?  

Well. An estate, a probate estate, is treated by the IRS as a stand alone entity, kind of like a business. So even though you’re not employing people, and even though it’s not a profit making venture, it’s still close enough that that the IRS needs it to have its own number. 

And instead of having a whole bunch of different types of numbers, you just get an EIN and it identifies the estate for federal tax purposes. So that’s kind of what it is.  

Every estate needs one because you need to report the estate’s taxes to the IRS separately from the decedent’s personal taxes. That’s a huge topic. We’re going to leave it aside for today, but you need this number. 

Using an EIN to open estate bank account

And you’ll need it to open an estate bank account. When you’re gathering the property, you need somewhere to put it. You don’t want to mix it with your own funds, right? That’s a big no no for a personal representative. So you need the EIN to go to the bank to open an estate bank account, to put all the decedent’s property in. Straightforward enough.  

How Do You Get an EIN for Your Estate?

Then the next topic is kind of how do you get an EIN. It’s really easy. There’s an online application that the IRS has and the personal representative can do it himself or herself or your attorney can do it for you.  

So I, you know, I give my clients the choice. Because it’s that DIY route, you know. Do you want to pay the attorney to do more work for you, or do you want to just go for it? It’s simple enough that most people could do it on their own. But you know, I’ve got lots of practice and I can make sure it goes right too.  

To do that, you know you need advanced permission. I can’t just pretend to be you. Right? Like you need to authorize someone else to apply for the EIN on your behalf. But it’s a really simple screen and it’s, you know, you choose “I’m trying to open an estate.” “Here’s the decedents information” you know, “here’s the personal representative.” And it usually issues right away. You get a confirmation thing right away and they follow up by mail.  

So no mysteries there. That’s what an EIN is. It’s just a separate taxpayer ID for the estate. It’s easy to get and you need one for an estate. Bank. Account. So if you’ve got any questions, you know you can call me. You can e-mail me if you’re already my client, obviously. And hopefully that kind of explains that aspect of the state administration. That’s all for now. Thanks and bye.