Revocable Trust and W-9 form

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Topic Author
clearwater
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Revocable Trust and W-9 form

Post by clearwater » Mon Dec 07, 2015 5:11 am

(edited: this account is actually one at Schwab BANK, not the brokerage side... something I just noticed. So apparently may be part of the Dodd-Frank banking act, and doesn't seem to apply to investment accounts, as I received no such notice for the brokerage account titled in the name of the Trust)

This may be a simple question for those of you who have figured it out, but I'm pretty much baffled.

I've got a Revocable Living Trust. I am the grantor. It is titled (at Schwab Bank) in the name of the Trust. As a single grantor, there is no separate tax ID required or used, you just use your own social security number. Until this year, no issues. Now I've got a form from Schwab Bank which makes no sense to me at all (the W-9). I've read the IRS documentation, whatever else I can find, and this simplest setup using a Revocable Trust is not in the instructions.

As an example, let's say your name is "John Smith", and you have a Trust titled as "The JS Trust". This apparently throws off the system, since the IRS doesn't expect these two entities to share the same tax ID. If it is a irrevocable Trust, or more Trustees, or something more complex, you would file for a separate Tax ID number and I suspect this makes the databases happy.

The form W-9 seems to say on line 1, that the name should match the Tax ID number. So I'm guessing "John Smith" goes on line 1. So far, easy!

Line 2 is for "Business name/disregarded entity name, if different than above". Reading the instructions and even other IRS documents on this is as clear as mud.

Has anyone else done this? It cannot be as difficult as it appears, as simple revocable trusts are a common structure.

I've called Schwab, who didn't know what to do, but agreed it was totally confusing. My attorney is equally unsure and recommends talking to the accountants. Since I've been preparing my own taxes for a very long time, I'd rather not waste $100 calling my former accountant to get this one question answered.

If anyone has advice on this, it would be tremendously helpful. Thanks!

kaneohe
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Re: Revocable Trust and W-9 form

Post by kaneohe » Mon Dec 07, 2015 10:20 am

clearwater wrote:(....................................
Line 2 is for "Business name/disregarded entity name, if different than above". Reading the instructions and even other IRS documents on this is as clear as mud.
...............................................
The instructions say you MAY enter something here so I would leave it blank.

"Line 2
If you have a business name, trade name, DBA name, or disregarded entity name,
you may enter it on line 2."

For line 3, I would check "Trust" and see if anybody objects.

Didn't you fill one of these out when you opened the account? Maybe call them and ask why they sent it to you now.
Banks goof up occasionally.

bsteiner
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Re: Revocable Trust and W-9 form

Post by bsteiner » Mon Dec 07, 2015 10:36 am

clearwater wrote:... My attorney is equally unsure and recommends talking to the accountants. Since I've been preparing my own taxes for a very long time, I'd rather not waste $100 calling my former accountant to get this one question answered.

If anyone has advice on this, it would be tremendously helpful. Thanks!
Your attorney should know to look at Treas. Reg. § 1.671-4.

Topic Author
clearwater
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Re: Revocable Trust and W-9 form

Post by clearwater » Mon Dec 07, 2015 3:19 pm

kaneohe wrote: Didn't you fill one of these out when you opened the account? Maybe call them and ask why they sent it to you now.
The account has been open a very long time. I think this is part of the new banking laws that went into effect a year or two ago. Schwab said they started sending out various forms last year to be in compliance.

Topic Author
clearwater
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Re: Revocable Trust and W-9 form

Post by clearwater » Mon Dec 07, 2015 3:32 pm

bsteiner wrote:Your attorney should know to look at Treas. Reg. § 1.671-4.
Thanks, I did have a copy of that, but still unsure what to do with the W-9 filing. I'm really trying to avoid a 5 minute phone call to my former accountants that is going to cost me a hundred bucks, is all.

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ResearchMed
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Re: Revocable Trust and W-9 form

Post by ResearchMed » Mon Dec 07, 2015 3:38 pm

clearwater wrote:
kaneohe wrote: Didn't you fill one of these out when you opened the account? Maybe call them and ask why they sent it to you now.
The account has been open a very long time. I think this is part of the new banking laws that went into effect a year or two ago. Schwab said they started sending out various forms last year to be in compliance.
We *just* (about a week ago) opened a revocable trust at Schwab for MIL, and IIRC, there wasn't a W-9.
We are transferring a moderately substantial amount away from BoA *only* because they will not allow a Co-Trustee to have a separate debit card, which DH needs to make occasional purchases on his mother's behalf so we don't commingle funds.
Schwab has no problem with separate debit cards.

For ID, we did need to locate her old driver's license from the state she just moved from, so Schwab could "know their customer", etc.
(Not sure what we'd have done without that, given that she isn't driving any longer, at age 95, she doesn't have any other photo ID.)

Is a W-9 really needed?
Her SS# was entered in quite a few separate places in all of the trust (Brokerage and Checking) paperwork, as was DH's on the same docs, because he is Co-Trustee.
(But MIL is the Grantor, so that's the parallel to your situation.)
I just don't remember seeing a W-9, although I suppose it could have been "built into" the booklet of all of the docs to be completed, and I didn't notice it as such.

RM
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Topic Author
clearwater
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Re: Revocable Trust and W-9 form

Post by clearwater » Mon Dec 07, 2015 4:04 pm

I think I might have found the answer to this issue, thanks to some very thoughtful person at the State of Illinois:

http://www.treasurer.il.gov/finances/pd ... 20FAQs.pdf

which says:

"For a Grantor or Revocable Trust, the grantors name must appear on Line 1, with the name of the Trust on Line 2."

which makes absolutely perfect sense, and I have no idea why the IRS couldn't just say this in the instructions, instead of these ridiculous terms like "disregarded entity".

So for now, I'll go with that. Hopefully this works out, as I don't know any other way to do this given the form.

Topic Author
clearwater
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Re: Revocable Trust and W-9 form

Post by clearwater » Mon Dec 07, 2015 4:14 pm

ResearchMed wrote: Is a W-9 really needed?

I just don't remember seeing a W-9, although I suppose it could have been "built into" the booklet of all of the docs to be completed, and I didn't notice it as such.
This only affects part of Schwab (and as far as I can tell, this only affects the banking side, not brokerage) as it has something to do with FACTA - Foreign Account Tax Compliance Act.

There seems to be multiple parts of Schwab's business, and sometimes they don't talk to each other. Sometimes you'll find Schwab brokerage and banking seem to work well together, sometimes they don't seem to know each other exists. With this compliance issue, it seems to be another department. So even though you just set up an account, what *seems* to happen is Schwab checks the taxpayer ID (typically, SSN) against the name on file with the IRS, and if the IRS says they don't match, you automatically get a letter asking for a W-9. So even though you just set up the account, you might get one of these as soon as they "catch up" and process your paperwork.

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HueyLD
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Re: Revocable Trust and W-9 form

Post by HueyLD » Mon Dec 07, 2015 4:52 pm

My guess is that the trust was set up a long time ago and its TIN was never reported to the bank.

As a result of new regs, the bank is required to have the trust TIN.

And yes enter the grantor's name in line 1 and the trust name in line 2 because a RLT is a disregarded entity.

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Artsdoctor
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Re: Revocable Trust and W-9 form

Post by Artsdoctor » Mon Dec 07, 2015 6:35 pm

Clearwater,

You're making this harder than it has to be.

The W-9 specifically says (on line 1), "Name (as shown on your income tax return). Name is required on this line; do not leave this line blank." You would put the name of the trustee here, and that trustee (or grantor) has a social security which will go in Part I.

On line 2, "Business name/disregarded entity name, if different from above." This is the name of the trust.

On line 3, you check off "Trust."

Having a trust often requires a bit of cleverness. If you're putting an asset (let's say your car) in the name of the trust, the title will often have only so many letters. Obviously, you don't have the space of putting "John Smith, Trustee, of the John Smith Revocable Trust, dated March 3, 2009" on the title. The same with investment accounts; you'll fill out the forms properly and then it's always interesting to see how it gets transcribed on the website or statement.

However, your lawyer really should be able to help you out with this. I've never had a problem with our estate lawyer answering simple questions like these, and I've never been charged (although I don't abuse the privilege).

Topic Author
clearwater
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Re: Revocable Trust and W-9 form

Post by clearwater » Tue Dec 08, 2015 6:00 am

Artsdoctor wrote: On line 2, "Business name/disregarded entity name, if different from above." This is the name of the trust.

On line 3, you check off "Trust."
Thank you VERY much, I really do appreciate it!

It does make perfect sense as soon as someone else explains it, but the documentation on this is just totally unclear.

The lawyers who set up the Trust are very good, but all the forms that have come out in the past year with changes in the banking laws are new to everyone -- they recommended talking to the tax accountants. I've got no doubt the accountants would happily set up a call on this, but just didn't need that much advice to warrant getting an invoice. (When I went to the "core-four" portfolio some time back, I suddenly made life simpler which meant I no longer needed the accountants at all.)

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Artsdoctor
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Re: Revocable Trust and W-9 form

Post by Artsdoctor » Tue Dec 08, 2015 3:40 pm

I'm surprised your trust attorney would refer you to your accountant over this. Like I mentioned, titling something can be a little intimadating at first since you're looking to do the right thing--but in 10 spaces. Our trust attorney has been terrific in making sure that everything is titled correctly since he views that as one of his obligations (after all, it makes no sense to set up a trust and then leave things out or screw things up when it comes to titles).

Once you do it enough, you'll get the hang of it.

Agent 99
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Re: Revocable Trust and W-9 form

Post by Agent 99 » Fri Apr 14, 2017 2:26 pm

I've been in a do loop with Vanguard on the proper way to fill out the W-9 for a revocable trust account. Here's a good reference. I'm going to submit this file to Vanguard with my W-9.

https://www.santeecooper.com/pdfs/about ... _paper.pdf

mfposa
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Re: Revocable Trust and W-9 form

Post by mfposa » Tue Jan 14, 2020 3:01 pm

agent99 - the link you provided did not work.

I have been putting my name in box 1 of w9 and the name of the trust in box 2. Then I'd check "trust" in box 3. That has worked until this year when I got an email from the asset (a real estate private investment) saying they needed the tax id of the trust. Well, the tax id is my social security number which I put on w9 but they are now saying that I need a separate tax id number for the trust based on new IRS rules as of 2019. So I'm confused....

Horsefly
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Re: Revocable Trust and W-9 form

Post by Horsefly » Tue Jan 14, 2020 3:15 pm

This thread seems to have come back to life twice now. I never noticed it originally.

We have a revocable living trust. The IRS considers this a "grantor" trust, as we (wife and I, co-trustees) control all the assets in the trust. As far as I can tell, all grantor trusts do not need a separate EIN, and they never have their own tax return. All income / losses pass directly through to the grantor.

We've had our trust for about 7 years, and never had a W-9.

I just found this article, which seems to agree with my interpretation: http://www.rabalaisestateplanning.com/n ... ber-or-ein

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HueyLD
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Re: Revocable Trust and W-9 form

Post by HueyLD » Tue Jan 14, 2020 4:11 pm

I also received a request to fill out W-9 and it was a total mystery to me.

I called the financial institution and was told that they must have a W-9 on file for my account or else....

I didn’t have the time or energy to fight them, so I caved and filled out the form to get them off my back. And guess what? I transferred the money out of there in due time.

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