- An estate includes all a person's possessions, including all of her assets and debts. An estate may include furs, jewelry, real estate, stocks and bonds and land. In addition to personal property, an estate may include bills due, overdrafts and credit card charges. When a person passes away, her estate must be distributed to her heirs and beneficiaries. The estate is distributed after all debts, including estate taxes, have been paid.
- An EIN is used to identify an estate for taxation purposes. When a person dies, his Social Security number is no longer used as an identifier; estates use the EIN as a tax ID number to replace the SSN for tax-reporting purposes. The IRS issues EINs upon request; in order to get one, fill out an online application using the IRS's EIN Assistant or file form SS-4 (see Resources).
- Many estates don't have much to distribute: a few favorite paintings, some furniture or a life insurance policy. However, more substantial estates are rolled over into a trust or the funds are used to operate a business after the owner's death. If you are the executor of an estate and are going to establish a trust or operate a business on behalf of the estate, you are required to get an EIN from the IRS.
- An estate is treated as a business by the IRS. You will use the EIN to identify the estate on federal and state business tax returns. In addition to tax reporting, you can also use an estate's EIN to open a bank account, apply for credit on behalf of the business or identify the estate to other government entities like licensing agencies.
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