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Episode 137 – A New Way to Save for Kids: Understanding the TRUMP Account

Insights from Last Paycheck Podcast Episode 137

Grandparents and parents ask the question all the time:

What is the best way to save for my kids or grandkids?

For years, the usual answers were a 529 plan, a UTMA account, or a custodial IRA. Each option has strengths. Each has drawbacks.

In Episode 137 of the Last Paycheck, hosts Archie Hoxton and Jimmy Sutch discuss a new savings vehicle introduced through recent tax law changes often referred to as the “big beautiful bill.” These new accounts, commonly called TRUMP accounts, blend features of several existing options and create some intriguing long-term planning opportunities.

While details are still being finalized and implementation is expected to begin in mid-2026, the planning implications are significant enough that families should start paying attention now.

Why Traditional Options Leave Gaps

Before understanding what makes these new accounts unique, it helps to revisit the limitations of existing tools.

UTMA accounts allow adults to invest for minors, but when the child reaches the age of majority, typically 18 or 21 depending on the state, full control transfers automatically. For many families, handing a large sum of money to a young adult with no restrictions can be uncomfortable.

529 plans offer strong tax advantages for education, but they come with usage restrictions. Funds must be used for qualified education expenses or face penalties. Families often hesitate to overfund these accounts if the child’s future educational path is uncertain.

Custodial IRAs can be powerful, especially Roth IRAs for young earners, but they require earned income. Not every child has a job early enough to maximize the opportunity.

Each tool works well in specific circumstances. None offers broad flexibility without tradeoffs.

What Makes the TRUMP Account Different

The new TRUMP account attempts to combine flexibility with long-term tax advantages.

Eligibility is broad. Any child under 18 may have an account opened on their behalf. Additionally, children born between 2025 and 2028 may receive a $1,000 federal grant to fund the account at inception. Some employers and private organizations are also considering matching or supplemental contributions.

Annual contributions are capped at $5,000 per child. That limit is scheduled to adjust for inflation beginning in 2028.

Unlike a traditional IRA, contributions are made with after-tax dollars. That means the parent or grandparent has already paid taxes on the money contributed.

Here is where the structure becomes particularly interesting.

The Tax Treatment

At age 18, the account converts into an IRA-style account. Contributions are not taxed again when withdrawn because taxes were already paid upfront. However, the earnings inside the account are taxed as ordinary income when withdrawn.

In effect, the structure resembles a non-deductible IRA. You contribute after-tax dollars, earnings grow tax-deferred, and earnings are taxable upon distribution.

There is an additional nuance. Employers may be permitted to contribute up to $2,500 on a pre-tax basis, and charitable or governmental entities may also contribute. If pre-tax dollars are included, careful recordkeeping becomes essential because those contributions and their associated earnings would be fully taxable upon withdrawal.

A Powerful Roth Strategy Opportunity

One of the most compelling planning ideas discussed in the episode involves Roth conversions.

Imagine a child reaches age 18 with a meaningful balance in this account. During college years, when income may be minimal or even zero, there may be an opportunity to convert portions of the account to a Roth IRA at very low tax rates.

For example, if a child has $100,000 in contributions and $100,000 in earnings, and little to no taxable income, strategic annual conversions during low-income years could result in minimal taxes paid on those earnings.

The result could be a fully funded Roth IRA by the early twenties. With decades of compounding ahead, the long-term impact could be extraordinary.

This is not automatic. It requires careful planning and tax coordination. But the opportunity is there.

It Does Not Replace Other Tools

Importantly, contributions to a TRUMP account do not reduce eligibility for other vehicles.

A family could fund a 529 for education, a custodial Roth IRA for earned income, and a TRAP account for broader long-term growth. Each serves a different purpose.

This flexibility is what makes the new account particularly attractive. It expands the planning toolkit rather than replacing existing options.

Implementation Timeline

While enthusiasm is high, families should understand that funding is not expected to begin until mid-2026. Financial institutions will need time to build infrastructure and finalize administrative procedures.

That said, proactive families can begin thinking through how this account might fit into a broader generational wealth strategy.

The Bigger Planning Conversation

At its core, this discussion is not simply about a new account. It is about giving the next generation a head start.

When children begin adulthood with retirement savings already in place, financial flexibility increases. They may be able to allocate more of their own income toward buying a home, building a business, or pursuing opportunities without sacrificing long-term retirement security.

Tax-advantaged compounding is one of the most powerful forces in wealth creation. Starting early magnifies that power.

Your Next Step

If you are considering saving for children or grandchildren, this is the right time to evaluate how all available tools work together.

Hoxton Planning & Management can help you determine whether a TRUMP account, a 529 plan, a custodial Roth IRA, or a coordinated strategy across multiple accounts best fits your family’s goals.

Schedule a conversation to explore how this new savings vehicle could integrate into your broader financial plan.

Early planning creates long-term advantage.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.