I attended this webinar in early July of this year. Only one change has occurred since then. The election to open this type of account is no longer done on Form 4547. The accounts are now being automatically created due to low enrollment.
This is an investment account for children under the age of 18 that is in the child’s name. They must have a social security number and be US citizens. Any child born between 2025 through 2028 can qualify for a one-time $1,000.00 federal deposit.
It is a tax-deferred account, meaning income earnings are not reportable until the age of 18 and upon withdrawal of any funds. There is no required withdraw until the age of 75. If withdrawal before age of 59 ½ there is a 10% penalty. Any withdrawals will be taxable to the owner of the account. An option at the age of 18 is to convert to a Roth with its taxable amount to be subject to Kiddie Tax.
A 529 plan is still recommended for education and custodial brokerage accounts.
It does not impact financial aid
$5,000.00 contributions (cap limit) can be made annually, but it is non-deductible contribution. Employers can contribute to the account as well for worker’s dependent children through a fringe benefit given to the benefit of the employee and can directly contribute to the Trump Account. The employer cannot be discriminatory in its contributions in giving only to owner’s children, etc.
Anyone (the child, parent, grandparent, charity, employer, etc.) can add to the account up to the year the child turns 18. After the child turns 18, only they can contribute. Contributions can only be until December 31st of a year and not the April 15 deadline.There is no gift tax form to complete.
These contributions do not reduce other IRA deductions.
When I first became aware of these accounts, I was skeptical. Robinhood was stated as being the holder of these accounts. Trump has not only cryptocurrency ($TRUMP) in Robinhood, but Robinhood contributed $2 million to his inauguration. Then I became aware of Nina Olsen (the previous tax advocate that I spoke with at her Future State of Taxation public forum in 2016). It was explained in webinar that there were problems with these Trump Accounts.
I highly suggest reading the article found in this link prior to making contributions so that an informed decision can be made.