BREAKING: Trump Accounts Now Live - FREE MONEY, Tax Benefits, and Key Rules & Steps

Download my Ideal Order of Investing Guide to see where the Trump Account should fall into your wealth building journey!: https://matsorensen.com/building-wealth-guide-the-ideal-order-of-investing/?utm_source=youtube&utm_medium=description-link&utm_campaign=youtube-WOHL&utm_content=ms020-trump-account-now-live

To Open a Trump Account: https://trumpaccounts.gov/

🇺🇸 In this special Fourth of July episode of Wealth Office Hours Live, I'm breaking down one of the biggest new tax-advantaged savings opportunities for families: Trump Accounts.

These new Trump accounts went live today, and I'm going to walk you through everything you need to know—from who qualifies and how to open an account to contribution rules, the government's $1,000 contribution for eligible children, investment options, and the Roth conversion strategy I believe can maximize tax-free wealth for the next generation.

If you're a parent, grandparent, or simply want to help give the next generation a financial head start, this episode will show you how these new accounts work and how you can use them as part of a long-term wealth-building strategy.

Happy Fourth of July, and thanks for joining me for this special edition of Wealth Office Hours Live!

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Transcript

SPEAKER_00 0:00

We have breaking news here. This is exciting. Trump accounts are finally live. These were passed during the one big beautiful bill a year ago, and they are now official on July 4th, 2026. You can actually set up and contribute to a Trump account for your child. Now, you might not be familiar with Trump accounts, but I'm telling you, these accounts are going to be in the lexicon of tax-advantaged accounts. You will need to know, and you will probably have one day. Something like 529s, Roth IRAs, 401ks, all these accounts you're familiar with. Trump accounts are the next thing. Now, these accounts are designed for children. You must be a U.S. citizen to have one and be under the age of 18. So any child in America, 17 or younger, can have a Trump account established for them. And these accounts have tax benefits. They grow and come out like a traditional IRA. So I'm going to break down what a Trump account is, how you can set it up, how you contribute to it and get the money in. And by the way, there's free money from the government for many of you. Also, we're going to talk about how you actually invest the account, how it can grow and build. And this is the why of why you should be thinking about this for your kids or your grandkids, your niece, nephew, neighbor kid, I don't care. The next generation, they need these accounts. Also, we're going to talk about how these turn into a traditional IRA when the child reaches age 18, how you can convert it to a Roth IRA, the strategy I love. And then how these accounts carry on and can be used later in life for the child you're establishing them for now. All right, now these Trump accounts, the purpose of them is to give a financial head start to the next generation. Let them have accounts that can have money in them that are going to grow and be invested, no taxes due. They will turn into a traditional IRA at age 18. And later the kid can pull it out later in retirement at age 59 and a half. This is a long-term wealth building account that you are setting up, again, for your kids or grandkids. Now I'm going to get into a lot of detail on this, but I just want to give some general statements here. Setup. When you set up a Trump account, you are going to go to trumpaccounts.gov. This is a federal government website. The actual provider of Trump accounts initially is Robinhood. This is also in collaboration with Bank of New York Mellon. They are the providers of Trump accounts for everyone who sets a Trump account up now. All other financial institutions that want to play in these accounts will come later on. You can move your account from Robinhood to the other bank or financial institution you may want in the future. But for now, if you're establishing a Trump account, you're going to be doing it with Robinhood. Now the setup process is quite simple. At Trumpaccounts.gov, you will see what you have to complete, which is a form called IRS Form 4547. It is actually not that complicated. Literally, you're going to put down your information as the parent, guardian, grandparent, other authorized person establishing the account for the child. You're going to put down your child's information, and then you're going to say, oh, we qualify for the free thousand bucks. Done. That is what is going to establish the Trump account. Now we'll get into investing here and getting more money into it and how to get the free thousand bucks. But that's it for establishment. It's going to be done online. It's a simplified form that the IRS has that the custodians, again, Robinhood, primary one, will be using to establish the account. Now, once the account is set up, which you can do on the app, you can download it from the App Store, or you can do it directly on the website. But once the account's set up, you can then contribute money into the account. So let's talk about getting the money into the Trump account. Now there are three primary categories of how money is going to get into the Trump account. The first, the free money. Let's talk about that one. Any child who is a US citizen born between 2025 and 2028 in those four years will get $1,000. So if you already have a child born in 2025 or so far in 2026, or you have one in 27 or 28, you're going to get $3,000 put into the Trump account by the Treasury Department. So you will just claim that $3,000 when you are establishing the account, Treasury Department's going to give you a $1,000 head start. After that $1,000, you can then put in five grand a year, either the parents contributing, the grandparents contributing, again, aunt, uncle, whoever it is, contributing on behalf of the child. So in the first year, potentially, you could be having $6,000 going into the Trump account. Now let's say you have a child who is already four years old. Well, you're not going to get the free thousand bucks, but you could be putting in $5,000 every year into this account. And again, that money is going to get invested. It's going to start compounding and growing. We'll talk about that here in the investment options and how that can grow over time in just a moment. So again, we got the $3,000. That's category number one. The $5,000 contribution that family members or friends or other individuals can contribute. And then the third popular one is employer contributions. There are employers who are deciding to allow up to $2,500 per employee to go into their children's Trump account. That employer contribution is actually not taxable income to you as the employee, but it will be expensed by the company and put into the Trump account of $2,500. Now that one, if your employer is putting in, let's say you have a child, four years old, and the employer put in $2,500 into your kid's Trump account, you cannot put in five. You can only put in another $2,500 for a total of five. So the $3,000, you can still put in your $5,000 and max it out. But any employer contributions that come in, you can only put the difference in up to a total of five grand per year. Now, the contributions you're putting into the Trump account, this $5,000 that's going in, you do not get a tax deduction for that. A lot of people think of Trump accounts like traditional IRAs because they're going to grow and come out like traditional IRAs. But the difference is when I put five grand in a traditional IRA for myself, I get a $5,000 deduction. If you put $5,000 into your kid's Trump account, you do not get a $5,000 deduction. Well, that sucks. And at first glance, this was a reason I did not like Trump accounts. But I'm going to get to how a Trump account turns into a Roth IRA if you do it right and it's not complicated. And because of that, I love Trump accounts. But I need you to get over this point here. You will not get a tax deduction to put the money in. Now the benefit of the Trump account is you put the five grand in, maybe you get a thousand bucks from the federal government to start it. You put another five grand in next year and the following year. This money's going in. You start investing it. Now there's no taxes on the growth. Okay, this is not going on your 1040, any investment returns or gains. It's not going on your kid's tax return. This is a tax-advantaged account. It will not be taxed as it's being invested and growing. And when your child reaches age 18, this turns into a traditional IRA. We're going to talk about this. And it's going to continue to grow until the kid reaches 59 and a half. At 59 and a half, they can start using this money, living off of it, maybe using it to retire early or to supplement retirement. But as they're pulling the money out, they will pay tax on all of the growth and earnings. All right. Now, I'm going to talk about how we will avoid that. We're going to get to strategies on how you do not want to have tax on the way out by doing a Roth conversion. We'll get to that here in a moment. But I want to make sure you understand the structure. No deduction on the way in when you put the money in the Trump account. When you invest it over time, it's going to grow. No taxes on the gains and growth. But when you start pulling it out later, the gains and growth are taxable later on when your child's 59 and a half. And it's going to go into their taxable income. Just the earnings and growth. The original contributions are actually not taxable. So now we've got the money in. Let's talk about how you can invest it. The nice thing about this is it can be invested and it grows. The problem is you are limited on what you can invest it into. This is not like a self-directed IRA that we do at our company directed IRA, where the account could be invested in real estate or crypto or a private company, an individual stock. You don't have full spectrum investment opportunity. You're going to be limited to index funds or mutual funds, primarily comprised of the US companies. Okay, that's it. Now that's good. I'm this is better than nothing. I like this actually, but it's a limited investment menu. Now let's say, for example, you invested it in the S P 500. Okay, like the S P 500 is an index fund. You can also buy it in a mutual fund format. And if your Trump account is invested in that, it's going to grow, right? And it's going to be compounding over time. Now, here's the power of the Trump account. Let's say that you have a kid who's seven years old. And for the next 10 years, you're putting five grand a year into the Trump account. Okay, so you put $50,000 in there. Now, the investment returns or growth during that period, if it was in, let's say, the S P 500, is getting an annual return of 10%. That account is going to be worth $92,000 when the kid is 17 years old. You only put $50,000 in, but it's actually worth $92. Now, the great thing about the Trump account is we want to let it continue to grow. We want to let that 92 grand turn into millions of dollars. And that is entirely possible by letting it compound and grow until the child reaches age 65. Okay, that's the most common retirement age now, is age 65, is when you can qualify for Medicare. So let's say your child can be disciplined. We're going to get to that here in a second. You got to also teach them about what the heck this is. And they let that money stay invested. When they hit age 65, assuming again a 10% annual growth rate, and they don't put any money in, this is just the five grand you put in for 10 years, that account will be worth $8.1 million. Okay, this is the power of compounding in time, how the money is going to be working for them. And when they hit age 65, it will be a massive account that they can truly look forward to and be living off of. Okay, now I mentioned earlier though, remember, when you start pulling money out of a Trump account after age 59 and a half, those dollars are taxable. Any of the growth after that 50 grand, that whole 8.1 million minus 50 grand is going to be taxable. It's going into your kid's taxable income. Well, I don't love that. There's a solution. One of the cool things about the Trump account is when the IRS published their initial guidance on this, they clarified that when a child reaches age 18, the Trump account turns into a traditional IRA. It's like a traditional IRA in their name. And now they can be contributing to the account. They have to have earned income, their own earned income, but they could be contributing to the account just like a traditional IRA. But the cool rule here is they can also convert that traditional IRA to a Roth IRA. At age 18, they're in a low income tax bracket if no income tax bracket. And so they could convert that whole account. Let's say it is the someone that was seven years old, you put in five grand a year for 10 years, and now the account's worth 92 grand. Let's say they're 18, 19 years old, and they want to convert this account to Roth. Cool. They can do a Roth conversion, convert that. They'll take in 92,000 into taxable income for that year. And then the whole 92 grand is now going to grow and come out entirely tax-free through the Roth IRA structure. So we want to be strategic about this. There's a couple steps that make the Trump account in the end an incredible strategy. One, we get the money in. You're not getting a tax deduction, but as a parent, you can put the money in for your kids. No requirement for them to have earned income. You put the money in for them. Let's get that money growing, invested. When they hit age 18, let's start thinking about a Roth conversion. Let's not let this account grow into an $8 million traditional IRA when they reach age 65. Let's convert it instead when they're 18 or 19 or in their 20s. So when they hit age 65, this money's coming out entirely tax-free. And the difference in the value they'll be able to enjoy is massive. $8.1 million in retirement is $8.1 million you can spend. It's not taxed by the IRS or by your state. $8.1 million in a traditional IRA is really like $4.5 million that you will actually get to spend because of all the taxes that will be due. So let's make this more valuable to us by enabling the account with a Roth conversion strategy. There's a couple things to know here. When you do a Roth conversion, there's a couple strategies to it, but the primary thing you want to work around is something called the kitty tax. If your child from the age 18 to 24 is a full-time student, reliant on you, they're dependent on you, they are subject to your tax rate. So when they do a Roth conversion, they assume your tax rate, not their low tax rate or no tax rate. So if the kitty tax applies, you'll likely want to wait until after age 24, because the kitty tax doesn't apply after that time. And then you can convert the account. Still, when they're 25 or in their 20s, they are going to be in the lowest tax bracket. They will likely be for the rest of their life. So is the optimal time to do a Roth conversion at that age. Now, the kitty tax might not even apply to your kids. They may be independent, working, they're not a full-time student. And in that case, don't even worry about the kitty tax. But there's one other critical point on the Roth conversion you've got to know. And that is when you convert the sums from traditional IRA funds to Roth IRA funds, and when these funds came from a Trump account, it is not the full amount that is taxable. It's only a partial amount of the total Trump account that is taxable. Now, the amount that's taxable in the Roth conversion is the earnings and growth. The original contribution you're putting in five grand every year, that's not taxable. The IRS considers you to have basis in this under the rules. And because of that, when you convert the basis amount of the contributions you never took a deduction for, that portion is not taxable when you do a Roth conversion. So let's go back to the example. Let's again say you have the seven-year-old, you're putting five grand a year in for 10 years, 50,000 of contributions. There's been investment returns and growth of 42,000. So we have account worth 92 grand. Well, when you do a Roth conversion, that 50 grand is not going into taxable income. It can convert to Roth. It's only the 42 grand of growth that will go into taxable income for your kid. And again, kitty tax could apply if they're dependent on you between 18 and 24, but it's only that 42 grand. So even if the kitty tax applies, you're not paying tax on the full thing. So it's still a great idea to convert this over to Roth. Now let me hit a couple questions that typically come up when we're talking about Trump accounts. First, do you or your child have to have earned income? No, you don't. This could be grandma or grandpa that's retired. They're contributing to the kids' Trump account. They don't have earned income. This could be your one-year-old that's not working, obviously. They don't have earned income. No earned income requirement. Don't confuse the Trump account with the kids Roth IRA. We love kids Roth IRAs and do kids' Roth IRAs for many of our clients. We have a lot of accounts at directed IRA that are kids' Roth IRAs. Those are typically kids working in their family business or they have a summer job or high school job. They do have income, and we're using that income to justify a Roth contribution for them even before they reach age 18. But that's a Roth IRA that the kid has because they have earned income. Now, most kids can't do a kid's Roth IRA, which is why I love the Trump account, because everyone can do that. The kid doesn't have to have earned income. You can contribute for them. Grandparents, again, anyone can contribute for the kid's Trump account, not deductible, no earned income requirement. And we can get it to Roth using the Roth conversion again at age 18. All right. Next question we typically get on this the $3,000. Matt, what if my kid was born in 2025? Do I get it for $25, $26, $27, and 28? No. It's a one-time $1,000. Okay. You do not get this in multiple years. Next question: What's the contribution deadline? When do I need to put the money in by for the annual contribution amount, the $5,000? You have until December 31st for that calendar year's contribution. This is not like a traditional IRA or Roth IRA or even HSA, where you get until April 15th for the prior year. All right. So don't confuse it. It's got a little different contribution rule. The money's got to be in by year end. Last point I want to say on Trump accounts is just get going on this now. Get this set up. I know it's a new account. You might not even like President Trump. I don't care. Get over that. This account is a tax advantage account. It's an opportunity to give a head start to your kids or grandkids. So many of us wish we had opened an account and started investing in our 20s, maybe even our teens. If you could have done this at age seven or had a parent or family member give you a head start, it would have been incredible. So get going on this. Use the holiday weekend. Take advantage of it. Also, subscribe to the channel and leave any questions that you have in the comments. I'm going to be coming back with another video going over all of your questions. I'm sure there'll be multiple videos on this. I'm a big proponent of these accounts, but I want to make sure you know every question to the answers that you might have. So feel free to leave a question in the comments below. I'm going to come back for another video and we'll be answering those questions. Also, turn on notifications. So when I go live like this, you're notified. And if my team can be of assistance to you at our company directed IRA at KQS Lawyers, let us know. There's links in the description below. We'll see you next time. Enjoy the holiday weekend. Happy birthday, America.