Trump Accounts Explained: Free Money, Real Tradeoffs

Trump Accounts became legal on July 4, 2026. Branden DuCharme and Carisa walk through what they are, who qualifies, and where they fit in a real plan.

Kids born between January 1, 2025 and December 31, 2028 can receive a one-time $1,000 contribution from the federal government. Branden's take: if the government is offering your kid free money, take it.

But these accounts come with a tradeoff that catches people off guard. At 18, the account is legally the kid's. No trust, no levers of control, no way to stop them from cashing it out.

What's covered: • Eligibility and how the tax treatment works • Why you're effectively locked into the S&P 500 • The recordkeeping problem that shows up 18 years later • Estate planning uses for high net worth families • The Roth conversion window in early adulthood • Business owner contributions and why most self-employed people don't qualify • Alternatives: 529 plans, brokerage accounts, custodial Roth IRAs

Questions or guest suggestions? We'd love to hear them.

Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented.

Encompass More Asset Management, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission, and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

Transcript

00:00:00:06 - 00:00:03:07
Branden
Any other pros or cons on your mind that you want to go over?

00:00:03:07 - 00:00:16:02
Carisa
One thing that some people may not know is that for kids who are born between January 1st, 2025 and December 31st, 2028, they can also receive a one time. $1,000 contribution

00:00:16:07 - 00:00:17:21
Branden
Free 1000 bucks.

00:00:17:23 - 00:00:29:16
Branden
hey, if the government's offering your kid free money, typically my going to say like, take it. But, you know, to each their own.

00:00:29:18 - 00:00:45:07
Unknown
Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented.

00:00:45:07 - 00:00:55:23
Unknown
Encompass More Asset Management, LLC as a registered investment advisor with the U.S. Securities and Exchange Commission, and only transact business in states where it is properly registered or is excluded or exempted from registration requirements.

00:00:56:01 - 00:01:09:21
Carisa
Hey, everyone. Welcome back to another episode of the podcast. I'm your host, Brandon DuCharme, joined today by Carisa Bertrand here in the newly finished Tall Oaks studio. Maybe that's what we should call it in here.

00:01:09:23 - 00:01:31:01
Branden
Okay, so today we are talking Trump accounts. They're new. People are excited. They're also wondering what the heck is going on because like any new government program that gets rolled out a lot of ambiguity around it. And, you know, what's the deal? How do I participate? What are the implications? Pros cons. So today we're going to cover what are they.

00:01:31:01 - 00:01:45:10
Branden
What's the program pros and cons. And then kind of some strategy potential around it, which I always tend to think is like the most important part is the strategy at the end. So I.

00:01:45:12 - 00:02:11:03
Carisa
Start with what they are. Yeah. Who there for. So the Trump accounts became legal on July 4th, 2026. So just barely this month. The eligibility is for all U.S. children under 18 years old with a valid Social Security number. So that's who these accounts are geared towards, those kids here in the United States. So these are an account that are for your children.

00:02:11:04 - 00:02:26:08
Carisa
That you can put some money into that becomes essentially a retirement account like an IRA. So we're going to talk about some of the differences between the traditional IRA and these Trump accounts, and kind of explain some of those analysis there.

00:02:26:10 - 00:02:50:19
Branden
If you want the most basic explanation, and you want to be able to just turn this podcast off and be done with it, the tax treatment is largely like a non tax deductible. Right. So your contribution is not a tax deduction in most cases here. Traditional IRA for your kid or grandkid or whoever right a kid.

00:02:50:20 - 00:02:52:06
Carisa
It continues to grow.

00:02:52:07 - 00:02:53:04
Branden
Yep.

00:02:53:06 - 00:02:55:17
Carisa
You don't pay taxes on that money until they take it out.

00:02:55:18 - 00:03:19:12
Branden
Yep. See see put 5000 in. Over the next 4 or 5 years it turns to $8,000. The kid turns 18 and they go, you know, pull it out. Okay. When they turn 18, the account will turn into a traditional Roth IRA or sorry, not traditional Roth IRA, just a traditional IRA. Yeah, yeah, yeah. Well, and what's a traditional Roth IRA doesn't exist.

00:03:19:13 - 00:03:46:20
Branden
Okay. A traditional IRA. So, listen, the 5000 you put in would come out. No tax, no tax. Because it wasn't tax deferred. The $3,000 becomes taxable income. And if it's not a qualifying distribution, they would actually have the 10% penalty on that distribution as well. Okay. So there you go. Like it doesn't. The difference between it and an IRA is that it doesn't require earned income.

00:03:46:21 - 00:04:01:14
Branden
Right. So a kid doesn't have to be earning money in order to contribute. And then the other big thing to really be aware of, like in the disclosure notes here around this is right now their custody and actually at the.

00:04:01:16 - 00:04:23:17
Branden
Department of Treasury. Right. They're going to you know, they're working on how to transfer those accounts out to traditional brokerages houses like Schwab or Fidelity. And however, they are very restricted in what you can actually best in. Right. So if you think about an IRA, you can buy stocks, bonds, gold, you can buy access to commodities, you can trade futures.

00:04:23:17 - 00:05:00:10
Branden
You could trade options, right. I mean there's yeah a lot of opportunity in the Trump accounts. There's like right now it's four options I think. And two of them are actually S&P 500 index funds. Right. The other option is just basically a total US market index fund. So more or less for all intents and purposes, essentially just realize like you're pretty much signing up to have the entirety of the account in the investment be S&P 500 right now, historically, with 18 years of hindsight here, great investment for most people, right?

00:05:00:12 - 00:05:24:23
Branden
18 years. What's happened in the last 18 years might not happen in the next 18 years. You're definitely taking with these accounts a you're taking a bet on the US economy and the structure of the market. Okay. Over the next period between now and when that kid turns 18. Right. So kids already 15 talking about a three year window.

00:05:25:01 - 00:05:44:08
Branden
The kid just brand new baby, right? 18 year bad. Now again, the the accounts of money goes in will be automatically invested as far as kind of is understood right now. And you actually cannot sell the investment at all. Right. So even if you, you know, markets getting dicey, your markets running up like you you can't pull back.

00:05:44:09 - 00:06:04:18
Branden
You can't you can't raise cash for a distribution like, hey kids 17.5 and, you know, wants to buy a car next year. Start doing some planning to have some money out like no if market crashes, you know, in that time period they will be waiting for that market to recover or be selling what it sound, you know, when they're 18.

00:06:04:19 - 00:06:36:22
Branden
Now, that is not a bug. That is a feature of of what these accounts are. So the intent is to try to encourage people to be long term investors, right, to stay invested for the long haul, let markets work for them. I'm going to not dive into in this podcast episode, the potential concerns around market structure and what happens when every single person converges on the exact same investment, and what happens later on when they can get out of that investment.

00:06:36:23 - 00:07:05:13
Branden
Right. But I saw I digress. Okay. There you go. That's that's like the summary that is your 30,000ft view. I mean, you know, the whole intent of these programs is like to help kids, you know, get ahead. And I think that that is going to bring us into like, pros, cons. What are some of the pros here?

00:07:05:15 - 00:07:28:06
Carisa
By the time you hit is 18, they can already have a retirement account started with a pretty good amount if you're starting when they're young. Right. Like the amount of money that you have to put in for them at a young age if it's invested. And like they keep that in their until their retirement age, they are like like you're as long as things with the market go well right.

00:07:28:07 - 00:07:40:05
Carisa
Like yeah as they happen. That's that's kind of like the general idea behind that. They're the earlier you can contribute the time value of money that is going to work in their favor.

00:07:40:05 - 00:07:43:07
Branden
Significant I yes.

00:07:43:09 - 00:08:08:11
Carisa
There. One of the cons is tracking the basis when it comes to tax time and taking out the money once they turn 18, if they want to take it out after that or at whatever point in the future. Yeah. There's going to be some real issues around what part of that money is taxable and what part has already been taxed based on, like what did you put in and how much is.

00:08:08:16 - 00:08:35:14
Branden
Yeah, right. So Pro is like the investment side of these accounts super easy because you get like one choice right. Yeah. It's like you put the money in, it's there. You get S&P 500 basically. And you know obviously the cost is really low, which is neither here nor there in this case. But con is like the record keeping side of this.

00:08:35:15 - 00:09:01:09
Branden
You have to pay attention to right now. It doesn't have to be be big and scary. If nothing else. All you did was every time money went into that account, you just kept a little spreadsheet that said who made the contribution, how much it was. Right, like, and what what tax year it was for, you know, or you just put the date, the amount and who made it like, you know, like if you have all that record.

00:09:01:09 - 00:09:18:15
Branden
So if somebody came to us 18 years from now and said, hey, you know, we're trying to plan with, you know, my kids turning 18, have them. We're going to do some strategy here on this Trump account and all this stuff. And we said, cool, what's your basis? And they said, I have no idea. They had a spreadsheet with that data on it and they could give me a.

00:09:18:17 - 00:09:39:19
Branden
Oh my gosh. Even if they just had a notepad that had all of it on there. Right? You could recreate what you need to write so a professional could look at it. This is for and probably do what they need to to recreate or track it all. So don't be too intimidated by that. But don't forget about it either.

00:09:39:21 - 00:10:01:16
Carisa
And it looks like based on what I could find, because again, this is brand new. So there's still a lot of ambiguity around some of this stuff, but based on what they could find, it looks like there are going to be some annual reporting requirements, stating what was contributed into account each year. So there could be. Yeah, that they're going to handle the report.

00:10:01:17 - 00:10:27:14
Branden
Yeah. The IRS guidance currently also says that, there's going to be some reporting on who made the contributions. Right. And so again, logistically, what does that look like exactly? I don't know I don't know yet. But it's not because I don't know. It's because no one really knows. Yeah. We should get more guidance. But that's just to say like whether you have to provide someone's name or for social or their birthday or I don't know.

00:10:27:15 - 00:10:43:14
Branden
Right. But if at the end of the day, if you nothing else for your records keeping sake over time, just say, you know, grandma contributed 500 bucks this day, you know,

00:10:43:16 - 00:11:13:02
Branden
That'll help. Yeah. My assumption slightly to a certain degree here is that like a your tax preparers will be pretty up to speed by the time taxes and rules around to know what needs to be reported or how to report that. Right. Just like with IRAs on an 80. Yeah. Well, on an 8707 with with a regular IRA, they're generally up to speed generally on how that gets handled.

00:11:13:04 - 00:11:16:01
Branden
So tax preparers probably the guidance.

00:11:16:03 - 00:11:21:11
Carisa
All right. So I think those two columns base some of those.

00:11:21:13 - 00:11:52:09
Branden
Yeah. There I think there's some really key ones. Okay. So pro from a from an estate planning perspective is it gets out of your, your gross estate, right. And your and your probate estate. Right. So if you're trying to give money to the next generation, right, whether it be kids or grandkids, the contribution amount is less than your annual gift exemption.

00:11:52:09 - 00:12:16:20
Branden
And and again, it gets money off of out of your state. Right. So if you're trying to set up a multigenerational, you know, gifting program during your lifetime, it's a really interesting way to do it. That's long been one of the big benefits of 529 plans and how, you know, wealthier families have utilized that to a more advantageous way than, you know, Main Street generally has, right?

00:12:16:21 - 00:12:40:09
Branden
Main Street generally has thought about always is the 529 is like, hey, you know, we put 50 bucks away every Friday, you know, try to save for Johnny's college. And by the time he goes to school, we've got, you know, $20,000 in their $50,000 or whatever. Meanwhile, ultra wealthy families are dumping tens of thousands of dollars, you know, in and it's a way to just get the money out of their gross, their gross estate or estate planning purposes.

00:12:40:10 - 00:13:01:23
Branden
Right? So it's just a totally different tool depending on the dynamic. Trump accounts are going to somewhat fall into that category. So for your, you know, really high net worth people that are trying to get money that way, interesting benefit. And it's really important with that though. And here's why. Just a quick reminder. The account is in the name of the kid okay.

00:13:02:01 - 00:13:18:01
Branden
Now there's a guardian or trust. There's like a trustee on the account. So you know, it's in little Johnny's name. Johnny's dad or mom is the trustee over it till he turns 18. And essentially that just means they're the adult that can help them with it. But again, there's not really any investments that can be made an investment selections.

00:13:18:01 - 00:13:38:14
Branden
So, you know, but that's apparent. That would help get money into the account potentially. They're the ones that could talk to the IRS about it or the custodian whoever's got it. They're the ones that make sure that the tax, you know, compliance is taking care of all the rest. Okay.

00:13:38:16 - 00:14:01:15
Branden
What's the con that comes with being in the kid's name at 18? That account is legally theirs, and there is not a dang thing you can do to keep an 18 year old kid from that money. It does not matter how crappy the tax consequences will be. It does not matter how horrific the decision is. It doesn't matter what their life circumstances are or their current decision making pattern in life.

00:14:01:17 - 00:14:26:10
Branden
The day they turn 18, they can call up the custodian, say, cash me out, send me a big fat check and you will have to watch that happen. If you are, you know the person that was the trustee over that. So listen pros and cons right. So pros can be super effective tools like con is and this is my big concern with these accounts.

00:14:26:12 - 00:14:45:09
Branden
If you do not take the time to train a kid when they are a, you know, pre-teen and teenager years specifically on how many works right on good financial decision making. Build a trust with them that like they they can talk to you about money. That money is something to be talked about, not to be shied away from.

00:14:45:09 - 00:15:06:15
Branden
Right? If you work with a financial advisor, get your kid introduced to the financial advisor, see if there's a, you know, a growing number of firms hire younger people that their sole job is to work with the next generation and kind of, you know, so like in younger terms and more modern things with, you know, the get going planning stuff, right?

00:15:06:17 - 00:15:32:05
Branden
Engage those kind of people. Right. Get your kid engaged or the grandkid engage with those kind of people. I jokingly say, like, I once upon a time was an 18 year old boy. And listen, it's like at 18, it's if you have an account that's ten, $15,000, like it's going to suck if they pull it out all out.

00:15:32:06 - 00:15:57:23
Branden
Right? Like, but but maybe they're pulling it out to, to pay for school or some other worthwhile cause. However, if you've had people, you know, funding up these accounts $5,000 a year, it's growing markets doing well, like all this kind of stuff. You could have an account that's, you know, in the hundreds of thousands of dollars potentially, for sure, tens of thousands, potentially hundreds of thousands.

00:15:58:01 - 00:16:17:20
Branden
That's a lot of money to have access to on your 18th birthday that no one can prevent you from getting right. Remember, if money is in a trust, you can put controls on the trust. There's levers of control with different strategies. This one has no lever of control data. Kid turns 18. Not my favorite, but you know, pros come with cons.

00:16:17:21 - 00:16:30:12
Branden
It's not a it's not a bug. It's a feature. It was built in by design. So you know, it turns to an IRA at the kid's 18th birthday.

00:16:30:13 - 00:16:35:16
Branden
Any other pros or cons on your mind that you want to go over?

00:16:35:17 - 00:16:51:06
Carisa
A good amount? One thing that some people may not know is that for kids who are born between January 1st, 2025 and December 31st, 2028, they can also receive a one time. $1,000 contribution from the federal

00:16:51:08 - 00:16:53:09
Branden
Free 1000 bucks.

00:16:53:11 - 00:17:11:12
Carisa
Even if you don't have money to put into it for your kid, that's, you know, newly born. I'm getting ready for 2025 to 20 31st 2028 to come. You can still put 1000 bucks in there from the Federal Reserve and have something started for them. So, I mean.

00:17:11:17 - 00:17:37:22
Branden
Yeah, it's something hey, if the government's offering your kid free money, typically my going to say like, take it. But, you know, to each their own. Okay, let's talk some strategy around this. So where does, like, Trump accounts fit? Where do they get used? Right.

00:17:38:00 - 00:18:02:09
Branden
One of the things we probably want to think about is like, what can you pull money out of an IRA for early you know, early on. So qualifying distributions from an IRA once. Now remember before they're 18 no money can come out of the account. No exceptions, zero exceptions. Once or 18 its traditional IRA. You can get a qualifying distribution for like buying your first house so you can take like $10,000 out.

00:18:02:11 - 00:18:26:19
Branden
You know, at least today that's what the rule is. So potentially like some down payment assistance, on a on a home disability. And there's a couple other provisions for like hardship withdrawals. Right. So there's a way to potentially access the money really in adulthood to maybe help you get a leg up in certain ways. Right.

00:18:26:21 - 00:18:55:07
Branden
I think one of the most compelling things to consider is Roth conversions. Right? So you end up with an account that is, you know, 50, 60, $80,000 for a kid. Now, remember, you have to pair this with the coaching piece, right? Because you can't do it for the kid. The kid's got to be involved. They can, you know, go work, do whatever they're doing in life, go to school.

00:18:55:09 - 00:19:24:04
Branden
I don't think anyone's going to point the finger at me for being sound too crazy that most 18 year olds don't make a lot of money, right? But. But but they still get. Yeah, they still get taxed. They still get their standard deduction. Right. What's the standard deduction in 2026 17,000. So if your kid only makes like you know, they're like, hey, they work part time while they're in school and they make $5,000 like there's $12,000 of deduction.

00:19:24:04 - 00:19:44:09
Branden
That is like essentially going to waste every year. Right. And that's pretty common for kids in that 18 to maybe, you know, 21 to 22 range depending on what they're doing in life. Right. So if you go in those years and you do a little bit of tax planning and you just take money out of the traditional IRA, move it to the Roth IRA, it becomes taxable income.

00:19:44:11 - 00:20:05:07
Branden
So if they made $5,000 a year, we're using today's numbers here. And you move over an extra 10 or $12,000 from the traditional to the Roth, okay. Adds it on their income. But the standard deduction still covers the whole thing. Send up paying no tax. You actually probably could do a little bit more than that because your basis is going to convert pro-rata.

00:20:05:11 - 00:20:26:02
Branden
And this is where you're going to want some tax help later on on the road from the tax planning perspective. But the basis would convert pro-rata. So you want to be able to you want to make sure that you plan that right. So you can maximize the benefit. But you know, my sort of thesis or theory here is that assuming sort of normal market returns over the next couple of years.

00:20:26:02 - 00:20:38:10
Branden
So not, you know, listen, if every single year you manage the time at the top of the market for the year, right. And do your contribution is going to your outcome is going to be different than the guy that manages to do a contribution to the day at the bottom in a crazy market, you know, every year or whatever, right?

00:20:38:11 - 00:21:04:21
Branden
So that's and both those results were different than the person that has consistently every single week. Right. So okay, back on task here. You can potentially help a kid early on convert a lot of money into Roth IRA. Now when it's converted, it becomes basis. After five years. They can take the. So some of it's already basis.

00:21:04:22 - 00:21:35:07
Branden
It's going to all become basis as you convert it after five years per conversion. They can take all of that basis out penalty free. Right. So if an early adulthood 18 if you kind of think about time, time phasing out adulthood 18 to 2122, you do the Roth conversions as they get into their 20s or later on. Now they have a bigger safety net to potentially fall back on as they are establishing a family, buying a house, trying to transition out of school and into careers, whatever.

00:21:35:08 - 00:22:03:05
Branden
Now you don't want to pull money out of these accounts, right? You don't want to put money out of a Roth IRA. But if you have to, you can. And stuff comes up in those. Yeah. And stuff comes up in those years. Right. So you now have flexibility, right? There's some financial flexibility you're building in now. In an ideal world, if they don't have to touch it at all and you just keep invested, you know, getting modest returns, that money is growing tax free.

00:22:03:09 - 00:22:20:12
Branden
Okay. So the big benefit here is actually as they get into adulthood, maybe you're not giving them money, right? Like you're not continuing to gift. Maybe you are. But and so you say well you know. Yeah. Great. I said I'm with a retirement account. But you know, they could get their own retirement account of the years. It's like, yes.

00:22:20:12 - 00:22:44:14
Branden
What you're helping them with is all of those contributions that people normally have to build into their own cash flow to save for and say, okay, I have to put money away so that I can make it to retirement someday. They will not have to have that same burden, right? So you're actually freeing up their cash flow and allowing them to live a different kind of lifestyle actually their entire life, potentially without losing sight of retirement someday.

00:22:44:15 - 00:23:10:01
Branden
Okay, now I've run some numbers and they probably still have to do some supplementing depending on how things go. But you know, we'll see. If I of course not like, you know, close out of my phone and pull it down. I read a quick just time value of money calculation. Right. Just to illustrate Trump accounts. And so here's the scenario, right?

00:23:10:07 - 00:23:23:23
Branden
Kids five years old annual contribution put $5,000 in the account 10% growth rate. It's been the historical like SMP growth rate.

00:23:24:01 - 00:23:52:07
Branden
Always a bunch of risk. Big drawdowns in between right. All the rest okay. In inflation rate I model 4% okay. I think we're in a secular high inflation environment. Now, I have talked about this a lot of times. Not hyperinflation, not not one republic, not money printers insane. And, you know, prices double every, every month for 4%, right.

00:23:52:09 - 00:24:17:11
Branden
Yep. Okay. It's just higher. Right. It's a higher inflationary environment, you know, so it puts your inflation adjusted rate of return at 5.77. So now what that means is look what we're going to all the numbers are going to talk forward. Now it's we're talking future potential returns. But we're going to talk just in today's dollars. So that way the app the concept doesn't get abstract because sometimes people will say they'll have these kind of conversations.

00:24:17:13 - 00:24:37:00
Branden
What they do is they say like, if you put away, you know, this money for your kid and see this all the time, like the IUL, the dirty IUL videos, and then like, your kid will be a millionaire and it's like, okay, yeah, like, wow, 80 years from now, my kid will be a millionaire. It's like, and that'll buy you a Honda Civic I don't like.

00:24:37:02 - 00:25:03:03
Branden
Okay. Right. So instead of trying to, like, pull the wool over people's eyes on big numbers, we're just gonna inflation adjusted. So we talk about today's purchasing power. Okay, so if five years old, just to recap, five years old, $5,000 contribution, 10% rate of return, 4% inflation, the future value at 18. With those assumptions.

00:25:03:05 - 00:25:07:07
Branden
It would be $93,000 in today's dollars.

00:25:07:09 - 00:25:08:08
Carisa
13 years.

00:25:08:09 - 00:25:31:03
Branden
Yeah. Okay. Look, not bad. And probably there's plenty of kids that'll do that. So if you think about though, like if your kid was 18 today. First off, 93,000 bucks. Happy birthday. Right. However, if you can pull it off. Right, if you have that relationship with your kids, if you have the people around, you have the team around you, you have your, really focus on the conversations.

00:25:31:03 - 00:25:52:03
Branden
Your kids are responsible, right? You're doing all those right things and you say, hey, don't just just leave it there. We're going to Roth, convert it. We're going to leave it there. Tell your 65, okay, now. Hey, big assumption here is you can Roth convert it without taxes and or if there is taxes. Mom and dad's helping out pay the taxes.

00:25:52:03 - 00:26:18:09
Branden
Right. So we're not going to take any of the money in order to pay additional taxes, right. And we just say, hey, same assumptions throughout adult life, right? Which is like, okay, 10% rate of return through retirement. Well, it's like, well, just like you're over year but like listen long term. So just you're just saying an average rate between 18 and 65, 10% inflation again at 4%.

00:26:18:11 - 00:26:36:11
Branden
And the inflation cycle actually in my opinion probably comes back down a little bit on the back side of that. So this is probably understating just a little bit. But you know how crazy to ever want to get okay. So excuse me. So you end up with a future value at retirement 65. Just over a million bucks.

00:26:36:13 - 00:27:05:17
Branden
Okay. Today's dollars today in today's dollars. Okay, so if you put the money away for your kid, like, what I want to illustrate is, like, if you're trying to put together your own retirement today and you said, hey, I have $1 million in Roth, right. If, like, you've got a lot of Main Street people that I think would resonate if you said, hey, your home's paid off, you have $1 million, you can access tax free, right?

00:27:05:19 - 00:27:24:08
Branden
That's like liquid. And the investments can adjust or change according to your, your your income needs or your risk capacity, right. All kinds of stuff. So you don't have that and you have $1 million in Roth. And you have, you know, and you have like, you know what? Like, let's say you even have half this, this Social Security benefit that somebody would have today, right?

00:27:24:10 - 00:27:27:12
Branden
Like, you're generally probably looking pretty good, you know what I mean?

00:27:27:13 - 00:27:33:05
Carisa
You're like the employer, you know, like, for one case and things that they have.

00:27:33:07 - 00:27:33:20
Branden
Yeah.

00:27:33:21 - 00:27:35:05
Carisa
You haven't included that at all.

00:27:35:07 - 00:27:38:12
Branden
No, no.

00:27:38:14 - 00:27:53:22
Branden
Yeah. And I would hope or suspect that if you get a kid to get through that Roth conversion period and they hang on and they do all the right things, they probably end up with some kind of job and you just say, yeah, hey, just, you know, do the for one k match, right? Like, just keep it like you might as well.

00:27:53:23 - 00:28:11:04
Branden
Right. They probably end up with like a great retirement. They probably end up with the capacity to, you know, help their kids in a meaningful way. Right. Like the whole point of these Trump accounts is to potentially try to get the ball rolling for the next generation. And, well, a lot of these things have been available to people and they just don't plan around it.

00:28:11:04 - 00:28:28:01
Branden
I think there's some other options that we haven't talked about and maybe we should cover really fast. Like the idea is being able to take an idea, which is I want to help to set up next generation and then give them a, you know, an avenue to do it. Right.

00:28:28:03 - 00:28:37:14
Branden
So it's a tool to potentially look at if that's your intent. Right. I'll go ahead.

00:28:37:16 - 00:29:01:23
Carisa
The other pieces. But as far as the strategy of what we've kind of talked about, we want to talk about, one here is for business owners. Yeah, that's another piece that when you're looking at the strategy for yourself and for your kids, if you're a self-employed business owner, there's some potential pretty big benefits here where right now, the contributions, just like for an individual to put the contributions to these accounts, is not tax deductible.

00:29:02:04 - 00:29:11:19
Carisa
But if you're a business owner and you're doing it, then there are some ways that you can provide some tax through $2,500 out there.

00:29:11:21 - 00:29:41:22
Branden
Super big nuances around that. So listen, if you're going to run the strategy, work with a qualified tax professional, right. You need a probably a really good accounting team around you. And in a good financial planner can help for sure. Some nuances if you're just like self-employed, which is like so schedule. See you have an LLC, but it's not there's no, you know, corporation being taxed here, then you're not going to be eligible for this, right?

00:29:41:22 - 00:30:04:08
Branden
As of right now, you have to run payroll in order to qualify. Okay. So even if you're one of the people out there that's doing, you know, you have nice corpse, you're filing a 1060 or, sorry, an 1120 s s Corp return, but you're doing a like schedule C in lieu of W2 type deal to file your self-employment taxes.

00:30:04:09 - 00:30:30:21
Branden
That's probably going to disqualify you there right from being able to do this. But you can do $2,500 per employee okay. So this is like if you're the business owner, you're also the employee. You can elect to contribute $2,500 to your kid's Trump accounts, right? That becomes a deduction on the business and and is not realized as income to the employee or the child.

00:30:31:00 - 00:30:53:16
Branden
Now it does not become basis in the account either. So when you do this Ross conversions later on it's going to become taxable. However it's going to be taxable. The kid that's 18 years old, instead of, you know, mom and dad, they're in their 40s peak earning years or whatever. Right. So that's your opportunity set. There's some real logistical kind of landmines to be aware of that can really throw a wrench in.

00:30:53:16 - 00:31:18:03
Branden
At the biggest one I'm going to call out, though, is like, you got to be running an actual payroll. And so S Corp election C Corp, you know, partnerships that are filing returns. Now a husband and wife are, you know, two spouses are, you know, business partners, both employees. You could do $2,500 per, right,

00:31:18:05 - 00:31:26:03
Carisa
$2,500 per employee. Yep, yep. Not per kid. Yep.

00:31:26:04 - 00:31:27:00
Branden
Yep.

00:31:27:02 - 00:31:37:07
Carisa
So like the W2 and payroll for them. Like if you have your kids working for you and they are on payroll.

00:31:37:09 - 00:31:43:05
Branden
You could potentially run it 2500 per kid that's working as an employee.

00:31:43:05 - 00:31:50:15
Carisa
So whether it makes sense to do it or.

00:31:50:17 - 00:32:19:07
Branden
I would say it depends how aggressive you're trying to get on your long term planning, if you like. Look, there's a number of things that you want to consider. Right. So, I always come back to levers of control, I think is one of the biggest ones on on generational planning, however, like 529 Lisas are not a bad tool, but use them, you know, targeted, right.

00:32:19:09 - 00:32:46:05
Branden
A brokerage account in your name with money earmarked for kids is like a really easy way to go about stuff, right? Pick up tax efficiencies when they're an adult, gift them shares, appreciated, shares that they can sell, and realize long term capital gains on their tax return. You know, but you get you on the asset. So you, you know, do it at your discretion when you think they're ready, when they're doing something that, you know, aligns with your family values, it's the easiest.

00:32:46:07 - 00:33:00:01
Branden
It's generally the one that I like lean for the most. Right. Then there's been hey, like, hey, my kids are working in the business, or my kid got a job, so they're going to open a Roth IRA. I'm going to give them the money to make sure that that Roth IRA gets funded. That avoids having a rough convert.

00:33:00:01 - 00:33:25:03
Branden
Anything. Now, this Trump account could be layered on top of all of those other strategies, right? So it's just an additional tool and you have to figure out what mix you're going to do. And oftentimes it's relevant to the amount of resources. Right. If you have $200 a year to give kids like you don't want to probably go employ, do a 529 for 50 bucks, you know, Trump account for 50 bucks, a brokerage account for 50 bucks, and a Roth IRA for 50 bucks.

00:33:25:03 - 00:33:48:06
Branden
Right. But if you're, you know, very high net worth and you're trying to really aggressively get your kids money, like you could do a lot of money and have a kid be quite wealthy by the time they are, you know, 18. So you have to figure out, like, again, what are the things you're looking for? What are the outcomes you're looking for when they're, you know, 18 to 25 years old?

00:33:48:07 - 00:34:05:15
Branden
What's the intent of everything that you're doing? And then you have to just pick like the accounts and the strategies that are going to align with your values, your risk appetite. Right. Again, like we talk about sometimes, you know, risk and investment seeing risk of loss. Like if your kid blows it at 18 that's a lot of loss.

00:34:05:17 - 00:34:28:04
Branden
You know like there's there's risk there. Now again your appetite is like I trust my kid, you know, hey if they if they I mean I've worked with clients that are like, hey, you know what? I want to do that because, look, I want to give them a chance to blow it up at 18, because if they do, then I know that this other hundreds of thousands of dollars coming their way in early adulthood, we got to rein back immediately.

00:34:28:04 - 00:34:40:13
Branden
And they they won't get it, but they won't know about that. But we're going to give them something to test, right. That's okay. To like again, part of your strategy. So build the strategy out.

00:34:40:15 - 00:34:57:15
Carisa
Just another tool that you can utilize and, and what works best for you, for your family, for your values, for your goals. But I think it's a pretty cool tool that's very. Well, I think it's gonna give some additional options to build that. Maybe you have some.

00:34:57:17 - 00:35:19:22
Branden
I'm excited that it's getting people excited about the conversation. I don't think it's the greatest tool. I think there's pros and cons. Right. But I think just if it's what gets you excited about having the conversation and doing the plan and being more intentional about with what you're doing, even if you land on a different strategy, right?

00:35:19:23 - 00:35:37:02
Branden
Or a combination of ideas, then then it's done a net positive for everything, right? So I'll hold back all my commentary on market share and passive investing for a different time, but that's that.

00:35:37:04 - 00:35:41:19
Carisa
So little something about Trump.

00:35:41:21 - 00:36:04:11
Branden
Trump accounts. And for those that don't like the man 530 as but people will probably not know what you're talking about if you say that anyways. Okay. Thanks everyone for joining us. If you have questions, comments, concerns, jokes, hate mail, insults, Throw them in the comments.

00:36:04:13 - 00:36:24:00
Branden
Like subscribe. All the rest. Come find us, hunt us down. Toss your questions at us. We'd love to answer them on the podcast. Any guests you want to have? Us you you think we should have on or types of guests? Let us know. We love interacting with you guys, getting the suggestions and feedback in just being able to provide the content that you guys are most interested in.

00:36:24:00 - 00:36:26:16
Branden
So see you guys out there.