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- [00:00]
A
Foreign I'm Kerry Sinnett and this is your combined tax section Odyssey and Personal financial planning podcast. CPAs are often at the intersection of tax, estate and multi generational wealth. But now and then new legislation brings fresh tools and with it new questions. With those new questions, it makes sense to combine but both tax and financial planning perspectives.
- [00:30]
B
So April, hello, I am April Walker. I host the Tax Action Odyssey podcast and I'm thrilled to join Carrie today on the Personal Financial Planning podcast. By combining our podcast today, we hope to be able to give you some thought leadership that impacts both tax and financial planning on today's topic, which is Trump Accounts. So as our listeners, you are advising families, business owners, multi generational estates. We are hoping this episode will help you navigate what these accounts are, these Trump accounts, how they work and where they might fit into a client's broader tax and financial strategy.
- [01:13]
A
April, so great to have you on to co host with me as we dive into this topic of Trump accounts and to help us unravel them. Today's guest is Sabrina Ivey, a national voice on tax and financial planning issues. She has deep expertise in regulatory guidance, technical implementation, and communicating complex policy changes in practical, usable ways. Sabrina serves on the AICPA PFP Credential Committee and brings both technical depth and real world Insight to help CPAs turn new rules like Trump accounts into meaningful client strategies. Welcome Sabrina.
- [01:57]
C
Thank you so much. I'm happy to be here.
- [01:59]
B
All right, Sabrina, let's dive into this really new and interesting topic. So let's just start off with what are these Trump accounts? We we know what the title is, but we don't know a lot about them quite yet. How are they introduced into the legislation? And then just thinking broadly, how do they differ from the existing options that we have out there, such as 529 plans or other custodial accounts. Great.
- [02:26]
C
Absolutely. From an advisor's perspective, I really think it's worth paying some significant attention to Trump accounts, which are also known as 530A accounts. These accounts were established under the One Big Beautiful Bill act in 2025 and they're essentially a new tax advantaged investment account designed for children under the age of 18. Structurally, they're best thought of maybe as a special purpose ira. They follow that framework but have some very specific rules. One notable planning opportunity is the federal pilot contribution. So for children that were born between 2025 through 2028, the federal government will contribute $1,000 to the account, assuming that an appropriate election is made. And it appears that that will be on Form 4 45, 47, in addition to the pilot contribution, non exempt contributions of up to 5,000 per year can be made. What's interesting there is who can make those contributions. So parents, guardians, grandparents, other family members, employers, friends, and it looks like there's even certain charitable organizations that can make these contributions, which really opens the door for coordinated family gifting strategies. Once the child reaches the age of 18, the account exits what they call the growth period and is generally treated as a traditional ira. There are some points along the way that are significant, though. I think it's important to frame the accounts against more familiar planning tools. So you mentioned a 529, 529s are obviously a great way to save for kids, specifically for educational savings opportunities. And the qualified withdrawals are tax free if they are used for qualified education expenses. Custodial or what we call utmore. UTMA accounts, on the other hand, are primarily just for asset transfer. So as the full control passes to the child at the age of majority, really regardless of that child's readiness to have those assets. And then one other thing that I haven't mentioned before that I think we'll talk about is there is an ability to use these Trump accounts and execute a qualified, able rollover contribution at the age of 17 for those kids that it applies to.
- [04:43]
B
Thank you so much, Sabrina, for giving us a backbone of how these are working. You know, I'm on the tax side more. And so we're still learning more about how this is going to actually operationalize, I guess, if that's the correct word. You mentioned form 4547. That is a 2025 form. So from what we know, it seems like you make the election on that form with your 2025 account, although you may be talking about this later. You can't make contributions to this account until I believe it's July the maybe the fifth, tied to the July 4th passing of the one big beautiful bill. So thinking about these conversations and as we're going, you know, here we are recording in in January. We're getting ready to go into tax season for my tax practitioners and my listeners that are in that world. Right. So can you walk us through and the roles and responsibilities that CPAs need to understand as they're talking to their clients about these Trump accounts, particularly you mentioned the growth period before they turn 18. Again, I think we're all just learning about how this works. But from what, you know, what are some conversations that might need to be had between now, say, and July, as.
- [06:03]
C
I was thinking about how to approach this topic. I really thought from an advisory perspective this is all the same that it is for every type of account that we're looking at we need to be advising on the eligibility and on the election. So again coming back to the Form 4547 and how that will actually work through the process, the CPAs I think will also be required to monitor the contributions, making sure that we are not hitting above those elections and that we are tracking the basis that will be created in an essentially an IRA account through 18 years, how that will be treated. And then we haven't really hit on this too much yet. But there are some very restrictive investment choices that are come along with these types of accounts. So I think having some review or oversight of how that is actually done and followed and then again educating our clients on the distribution restrictions and on the elections that can be made along the way and so coordinating those all with all of the Other plans so the 529s, Roth IRAs, custodial accounts and even some trust and estate planning can go in there as well. So I think that that very high level is what we're looking at. And then obviously this is evolving so moderate guidelines and regulations and see how things are evolving for the next however many years for sure.
- [07:29]
B
More to learn. But your clients are probably looking to you for information on how this is going to work. And you need to be able to at least provide them with what we know now. And that's fine to say like more to come. So you mentioned the contribution and the investment rules for the Trump account. As far as what we know now, they're very specific. There's limitations on the fund types, the investment types, how it might coordinate with employee contributions. Talk to us a little bit more about how you can help advisors think about evaluating those savings options available to families. You know, I have a 19 year old who's getting ready to go to Italy for study abroad. Is she a saver? No, she is not. She's relying on her wonderfully generous parents and to provide this great experience for her. But I'm hopeful that maybe people who have younger children can learn from my mistakes. Not to lead the witness, but Sabrina, that's kind of what I'm thinking. Like how are you helping evaluate these different savings options?
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C
Yeah, I mean like I said, I think it's important to balance and figure out what our clients real philosophies are, risk tolerances, needs are. I also have a 19 year old who also is not a saver. So I appreciate your comments, but I do think there, there's value. So kind of going back to the thought of the investment restrictions which are they think in very material as we look at these accounts, basically during that growth period, which is again from the time the accounts open until the December 31st when they turn 18, the funds may only be invested in eligible mutual funds or ETFs. That I'm going to read this because I thought it was interesting track a broad based US equity index. So think S and P or something with the majority of 90% US companies can't use leverage. Their annual fees have to be less than 0.1% of assets, can't be industry or sector specific. So again from an investment philosophy that's a very restrictive level there. And then there may also be additional criteria that are set by the treasury as this continues to evolve. When we compare that to Roth IRA for example, as a saving strategy I know I've used for my 19 year old, I don't have restrictions. So he can be invested wherever we deem fit. And from an investor philosophy kind of having that flexibility and maybe having some sector industry control has been a positive impact for us. 529s also have limited options, but they are broader I would say than what we're seeing so far for the Trump accounts. And then the other one that's kind of getting looped into this is the able accounts which I don't have a whole lot of experience with, but my understanding is they have more plan specific investments similar to 529 accounts. So I think again having an idea of where everybody fits and what their long term goals are and what the long term projections are for the accounts will be the most material thing for you to understand on a case by case basis.
- [10:35]
A
Sabrina, thanks for your insight there. You know, this is really a shift into long term thinking. And you had mentioned that the fee structure had to be 0.1, that just the fee structure alone kind of limits it to low cost index funds. And so I want to dive deeper here from an estate tax and multi generational planning perspective. What are the most critical decisions we need to help clients make as we're thinking long term? And I love the philosophy of starting the account when the child is a baby. But what decisions do clients need to make as the account transitions at age 18? I remember when I was 18 and I was not the best investor. You both have 19 year olds, so you know where it's at. So help us think about that from the client's perspective. What do I do. When my child turns age 18, how do I help them make good decisions? Also, what happens if something happens to the child, an early death or something like that, during that initial 18 year period of growth?
- [11:48]
C
Yeah, well, I think as with again with everything, proactive planning is going to be the most important and adjusting through this very long potentially growth period of 18 years here. So I know I've said growth period several times. That really is 18 years is a long time for things to grow. So after the account hits that deadline of December 31, when they hit 18, the account is generally subject to the same rules as a traditional ira. So you have the ability to do things like Roth IRA or Roth conversions or keep it as an IRA essentially with basis. Again, so kind of knowing those deadlines is important. I also reference the Able account, which again, I don't have a lot of experience with, but this is a really unique feature that is essential to pay attention to your deadlines. So in the year that the beneficiary turns 17 is the one opportunity that I can see that they can transition these savings account into Able accounts. That kind of hits on that point, Carrie, that you said about what happens if something happens to a kid. You don't always know in that first year or in many of the subsequent years is what's going to happen. But there is a key point there at the year 17, and if they hit into that 18th year, that able rollover disappears. The other thing that you touched on is always a little bit harder to talk about. So what happens if there is an early death during that growth period? This is another interesting treatment. From what I understand, if the beneficiary dies during the growth period, the account is no longer treated as a Trump account as of the date of the debt. So the fair market value of the account reduced by the basis is included in the income of the person who acquires the account. So the beneficiary of the account essentially has a income flow in that year. From what I can tell, this is a unique experience and a way that an account would be treated. I don't. Maybe there are other accounts that get treated that way, but I'm not aware of them. After 18, again, they can do a Roth conversion. They can decide to do that whenever they want to based on what their income is. So I know for my 19 year old, wow, 19 would be a great time to do a Roth conversion for him because his income is very, very low. And then just from we've talked about it a little bit from an estate planning Perspective, there are other alternatives that may or may not be more useful or more productive as far as actually transitioning the wealth, but this is certainly one to consider.
- [14:23]
A
I really want to help our listeners evaluate some of the trade offs between using a Trump account versus, I don't know, an irrevocable trust structure. When we're planning for minors or young adults with potential future needs like education, special needs, I guess that's where the, the able accounts would come in. Or let's say we have star child entrepreneurship. Do they have opportunities to use this as capital for a business or a home? Help us really look at all those different trade offs that we have to consider with the Trump accounts versus other things.
- [15:03]
C
Well, with it being treated as essentially a special IRA account, it really is focused on that long term growth and being a key for transitioning assets or funds. More from a long term perspective. Like we said, we can do things like a Roth conversion at some point during this to help with entrepreneurial transitions or opportunities, that sort of thing. So you can maybe do some of those things. But I think more when you're trying to have some control over how assets are used and maybe facilitate some of the more creative use of assets in the short term, trust accounts would still be something that I would consider more friendly to that and sometimes I have a negative, I guess, slant towards custodial accounts because of that transition at the age of majority, that that can also be very useful as well.
- [15:59]
A
Sabrina, that was really helpful. Okay, as we're thinking about Trump accounts, what key Planning considerations should CPAs address as a Trump account approaches the end of that tax free growth period, especially around qualified distributions, rollovers, integration with broader estate plans? We've been essentially alluding to these different things. What are some of the details? What do we need to know at the time that the child turns 18?
- [16:28]
C
So again, going into this transition when the growth period is ending, so as the child's hitting age 17, that able account again only has that one year to make a decision on it if you want to make a contribution into it. And then really I would say in that same time period from a financial planning perspective, we need to be evaluating the child's needs at that point. So what are the distribution needs? What is the income? Would there be penalties associated with anything that we are considering doing from a distribution perspective? The other thing is updating beneficiaries to make sure that we have, if this account does roll over, become an ira, make sure that that is up to date and current. These are intended to be very long held account so life changes along the way after the growth period. I would say treating the account as a traditional IRA with thesis for most of what we have is tricky. It is tricky, particularly when you are switching between CPAs and making sure that that information gets carried forward for more than 18 years at this point, monitoring the basis, keeping track of it, and then I've said it a couple times, but consider a Roth conversion, particularly in those early years of adulthood when income tends to be low and it can be a great opportunity to move money into what I sometimes refer to as magic accounts of Roth IRAs. But the biggest thing is just how do these accounts integrate with all of your clients? Other opportunities for tax planning, all of the other opportunities for estate and wealth management and how do they all coordinate together is all part of a systematic financial plan that needs to be done not just at 18, but through the child's life and adulthood.
- [18:06]
A
You can really see the important value that you have because you have the full picture. You can see everything that's happening to the client and what their needs are. At the same time you have this information about what is a new tax instrument, the Trump Accounts. And so Sabrina, thank you for sharing with our community of listeners and to you listening. This is just the start of information on the Trump Accounts. You can go to the AICPA website to get more information and resources. Also, there will be some connected to the show notes on this podcast, but if you want to deliver thought leadership with confidence, consider exploring all the resources and technical guidance you can find both at the AICPA Tax Section and PFP section on the AICPA website. This is our podcast together and if this episode helped you in your practice, we'd be grateful and frankly just a little humbled if you shared it with your professional community on behalf of the AICPA Tax and Financial Planning Sections. Thank you for listening and we'll see you on the next episode.
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D
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