530A Trump Accounts

Beginning on July 5^th of this year, the new 530A accounts AKA “Trump Accounts” will be available as a planning tool for Americans.

Like anything financial planning related, there’s a simple answer, but many potential considerations to keep our heads on a swivel. Let’s start with some simple facts and we’ll build on more complex matters and end with our BIG IDEAS:

1) Who can utilize it?

• Anyone under 18 that’s a U.S. citizen, and has a Social Security number
• Children born between 1/1/25 and 12/31/28 will be eligible for a $1,000 contribution and is considered a “pilot program” 
• Only one account per child

2) Requires Form 4547 to be filed. Middle of 2026 is when the government is indicating online opening will be available at www.trumpaccounts.gov 

• Doesn’t have to be filed with a tax return but it can

3) Parents/caregivers and employers can contribute up to $5k and considered “after-tax”. There is no income requirement for contributions like there are for IRAs.

1) This is NOT like a 529 education account. Children receive the proceeds outright at 18 which can be used for anything. As a result, some people may not feel comfortable providing an adult child with that much control – especially when it’s unclear the future financial responsibility of a young child.

2) Contributions do not impact ability to contribute to IRAs

3) Funds must be invested in an index of predominately US companies with a cost of less than .1%. Think of an S&P500 index. Over time this is just fine but does limit investment flexibility and ability to diversify.

4) Withdrawals are not permitted until age 18.

1) Trump Accounts, at this point, do not qualify for the annual gift tax exclusion like a 529, for example, and would require individuals to file Form 709 with their taxes as part of their lifetime gift tax exemption regardless of how much they contribute.

• • To change this will require legislative action. We have no crystal ball but it would seem likely they’d want to clean this up.

2) The $5k contribution isn’t so basic.

• That’s the cap per year for parents, other individuals, and businesses (i.e. one account per beneficiary and $5k total). Unlike a 529 education savings plan where there can be multiple accounts and with much higher contribution limits based on annual gift exclusion of $19k per person per beneficiary.

• The $5k cap gets interesting though. There are exclusions like the $1k by the government. What’s more interesting is that this also extends to “qualified general contributions” which could be made by certain charitable organizations or government entities. This type of exclusion would need to follow very specific rules. Not quite sure what this means yet, but we have some thoughts.

• Businesses can also contribute but that’s considered pre-tax and would be taxable just like an IRA and subject to 10% penalty before age 59.5
  • There are caveats to the penalty though, like a first-time home purchase, higher education expenses, and significant medical expenses. 

• If you own a business this could be a new benefit for employees capped at $2,500 per employee (even if they have multiple children).
  • The contribution is excluded from the employee’s gross income providing a tax-free benefit.
  • Employee benefit plans are typically deductible as a business expense.
  • There are few more plan design and integration conversations, so reach out to our team if interested in learning more.

1) If you have a child(ren) born between 1/1/25 and 12/31/28, go ahead and open an account for the $1k funding from the government. Even better, if your employer will contribute then have them make their contribution as well. This is akin to getting an employer match. Don’t leave money on the table.

2) Because children receive money outright at 18, use the account as an opportunity to educate on financial management and investing. Talk about budgeting, saving for goals, basics of investing like “what is a stock”, and other discussion around investing principles.

3) We would generally recommend focusing personal contributions to save for children through 529s because of the generous contribution rules, investment flexibility, and multiple tax benefits including the ability to convert up to $35k to a Roth IRA for beneficiaries.

Additionally, if you have a tighter budget, we encourage people to save for themselves first. Use your own accounts like a taxable account with no age limit on withdrawals, or a Roth IRA that enables the tax and penalty free withdrawal of basis. Both options enable you to save but be flexible on future withdrawals. 401(k) loans are an option as well but generally less desirable.

4) Trump Account are eligible for Roth IRA conversions at age 18 which could be beneficial. Part of why conversions might be helpful is that the IRS confirmed that in Notice 2025-68 that Trump Accounts would be subject to RMDs (required minimum distribution). So the benefit would be paying tax when younger and in a lower tax bracket as opposed to a potentially higher future tax rate when required to tax distributions.