Trump Accounts:  PFS Update on Whether and How to Use Them

In June, we published a blog article entitled, “Trump Accounts:  What Are They, and Should I Be Using Them?”  We explained how to open a Trump account for your child and the limited circumstances in which we recommend using them.  In a few short months, however, several of the details surrounding Trump accounts have changed, so we provide an update below on whether and how to use them.

How do I open and fund a Trump account?  Initially, parents or guardians had to file a form with the IRS to open a Trump account for their child.  Only a small percentage of eligible children (approximately 10 percent) had Trump accounts opened on their behalf within the first couple months of the program though.  Therefore, the Treasury Department automatically opened a Trump account for every eligible child (under age 18 with a Social Security number) in late September.  This move took place whether or not a child was eligible for free money (as discussed below), and there is no option for parents to opt out or close the account on behalf of their children. 

Parents and guardians can either go through a process of claiming their child’s Trump account via the official app to assume control over it, or they can leave the account unclaimed and the account will be closed in the year that the beneficiary turns 18.  In the interest of security, parents and guardians have incentive to claim the Trump accounts for their children even if they have no intention of ever using it and do not ever receive free money in the account.  At a minimum, that will prevent others from improperly claiming it through identity theft.

Should I fund the Trump account for my child?  In our last post, we explained why most financial goals for your children would be better served by funding a 529 account and/or a UTMA account rather than a Trump account because they have more favorable tax treatment (especially the 529s).  So, in terms of contributing your own money toward your children’s future, we do not recommend funding Trump accounts except in rare cases in which you are more focused on jumpstarting your child’s retirement savings than helping with education expenses or savings goals in early adulthood.

However, when someone offers free money with no strings attached, financial planners typically recommend that you say yes.  With respect to Trump accounts, for example:

• If you have a child born between 2025 and 2028, who is eligible for the Trump account pilot program contribution of $1,000, you should claim your “free money” from the federal government. 
• If you have a child under age 10 in a zip code with median household income under $150,000, who qualifies for the Dell Foundation’s contribution of $250, you should claim your “free money” from the Dell family.  (You can check eligibility here.)
• If Elon Musk follows through on giving a share of SpaceX to every child in America via Trump accounts (as announced on Twitter last week), you should claim your free share—and then sell it and reallocate into a stock index fund after the 5 year mandatory holding period.  (A SpaceX share is currently worth approximately $150.)

In light of the changes in the rules of the game over the last few months, we do recommend claiming your child’s Trump account and taking advantage of the “free money” that has already been deposited or that might be deposited in the coming year.  We do not recommend, however, adding your own money to the Trump account in most cases.  If you have questions about whether funding a Trump account would be beneficial for your family, please call or email us any time.