You just received Letters Testamentary appointing you as the executor or personal representative of an estate, and the next step is to open an estate bank account, right? Not quite yet. Before you can go to a bank to open an estate bank account, you need to obtain an estate EIN or estate employer identification number. It may seem bizarre to you that a person’s estate needs an EIN, but when you think about what an estate actually is, it makes a bit more sense.
Let’s break it down a bit. After somebody passes away, everything they owned and owed becomes a part of their estate, a separate entity, which functions similarly from a tax perspective to a business. While the estate is “open” it can collect assets and pay off debts and expenses. The estate may also generate income from investments which would mean that a 1041 would need to be prepared to report the income at the close of the year. So while the assets and liabilities of the estate once were owned by a living person, post-death they form a completely separate entity, which needs an EIN in order to legally operate.
Step One: Visit the IRS website and navigate to the EIN Assistant. You can find a direct link here: https://sa.www4.irs.gov/modiein/individual/index.jsp
Step Two: Select the “Estate” radio button for the type of legal structure. It is important to note that if there is a Trust as part of the estate, you may need an EIN for the Trust as well (check with your attorney).
Step Three: Confirm that you are obtaining an EIN for an estate. If yes, click continue.
Step Four: Enter the information of the deceased. Make sure the information you enter is the legal name of the decedent that is recognized by the IRS. This will ensure that the application does not get delayed.
Step Five: This is the step to tell the IRS about your role as it pertains to the estate. You are likely the executor or personal representative of the estate, and if so, will need to add your legal information into the fields provided and select the corresponding radio button. If you are not the executor, personal representative, or administrator of the estate and are a third party, you can select that button, however, additional legal documentation will be required in order to proceed as a third party.
Step Six: Next, you will need to enter the mailing address for the estate.
Step Seven: You are almost there- simply select the correct radio button for the question regarding the number of employees the estate is expected to have within the next 12 months.
Step Eight: Last but not least, select the form in which you want the EIN to be delivered. If you select the digital option, your EIN will be ready for you to view and download immediately.