Q: How will creating a trust affect my tax returns? Do I have to prepare a tax return for the trust?

A: As a general rule, creating a revocable living trust naming yourself as trustee will not affect your tax reporting.

Mot revocable living trusts do not require a taxpayer identification number (TIN). You will continue to use your social security number on your accounts and income will continue to be reported on your personal income tax returns.

It's your money after all, and as long as you are reporting the income and paying any resulting tax, Uncle Sam should be cool.

In my job, I see a lot of trusts that name First National Bank as trustee rather than the person creating the trust. In these cases, we apply for a TIN for the trust and file a fiduciary tax return. The tax return is really just an informational return, but we do in fact file the return.

Since it is important for a professional trustee to keep track of income and principal, a separate tax return makes the administration easier. Some accountants have told me that a separate TIN and an informational return isn't required for our revocable living trusts. However, from an administrative standpoint, I like having the separation. Formality for formality's sake.

After your death, when the trust becomes irrevocable and settlement begins, a separate TIN is required as is a fiduciary tax return. After your death, income should no longer be reported under your social security number. At that point the trust has it's own tax reporting requirements.

Immediately after the death of the settler, I request a TIN for the trust and start reporting the income to the trust rather than the individual. Even in situations where I already have a TIN for a revocable living trust, I request a new TIN for the death transfer trust. Remember, after your death, the trust becomes an irrevocable trust. In other words, the John Doe Revocable Living Trust becomes the John Doe Irrevocable Trust after your death. The new trust requires it's own TIN and fiduciary tax returns.

Having said all that, don't let the tax reporting dissuade you from creating a trust. Most people won't notice a difference.

Also keep in mind that we are talking about revocable living trusts with the settler as the trustee. If you create an irrevocable trust, such as Irrevocable Life Insurance Trust, a separate TIN and tax return are likely to be required.

I suppose the rule of thumb is if your created the trust, have total control over the assets and receive all of the benefits and income, it probably doesn't require its own TIN and it can be reported on your tax returns. If in doubt, ask your attorney or accountant.

Opinions expressed solely are those of the writer. Christopher W. Yugo is a member of the Indiana Bar and a vice president and senior trust Officer for First National Bank's Trust Department. Address questions to Yugo in care of The Times, 601 W. 45th Ave., Munster, IN, 46321. Yugo's information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant or estate-planning specialist.