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Why Filing for an EIN Is Essential for Estate Administrators

When a loved one passes away, their estate becomes a separate legal entity. As an estate administrator, one of your first responsibilities is to apply for an Employer Identification Number (EIN) with the IRS. While this step might seem like a minor bureaucratic task, it is crucial for managing the estate’s finances and complying with tax laws. This blog explains why filing for an EIN is necessary and how it facilitates the administration of the estate.

NorthStar Team

2/5/20251 min read

a close up of a typewriter with a tax return sign on it
a close up of a typewriter with a tax return sign on it
What Is an EIN, and Why Is It Needed?

An Employer Identification Number (EIN) is a unique nine-digit number issued by the IRS to identify entities for tax purposes. When a person passes away, their Social Security Number (SSN) can no longer be used to handle their financial matters. Instead, the estate—now a separate legal entity—requires its own tax identification number to handle various obligations.

Here are the main reasons why an EIN is necessary:

  1. Filing Income Taxes for the Estate

If the estate earns income after the decedent’s death (e.g., interest, dividends, rental income, or gains from the sale of assets), it must file a federal income tax return using IRS Form 1041. An EIN is required for this filing.

  1. Opening an Estate Bank Account

Estate administrators need to open a bank account in the name of the estate to manage funds, such as paying debts, taxes, and distributing assets to beneficiaries. Banks will require an EIN to set up this account.

  1. Reporting and Tax Obligations

The EIN ensures the estate’s financial activities, such as income and distributions, are properly reported to the IRS, separate from the decedent’s personal tax history.

  1. Identity Protection

Using the decedent’s SSN after their death can expose it to fraud or identity theft. An EIN prevents this by providing a secure and distinct tax identifier for the estate.

Key Takeaways

Filing for an EIN is an essential step for estate administrators. It enables you to:

  • Manage the estate’s finances legally and efficiently.

  • File income tax returns for the estate.

  • Open estate-specific bank accounts.

  • Protect the decedent’s identity and ensure compliance with IRS regulations.

By obtaining an EIN, you’re laying the groundwork for a smooth and lawful administration of the estate, ensuring all financial and tax-related matters are handled properly. Taking this step early in the process can save time and prevent complications as you fulfill your responsibilities as an estate administrator.

Contact Us if you need a contact of a CPA who is experienced in filing estate tax returns.

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