A new federal savings vehicle for children, often called a “Trump Account,” is beginning to roll out. This article addresses how this new investment option will fit into an overall estate plan for Oregon families.
In simple terms, a Trump Account is a tax-advantaged account for a child under age 18 with a valid Social Security number. A limited group of children may also receive a $1,000 federal contribution, but only if the child is born between January 1, 2025 and December 31, 2028, and the account is properly established. The new Trump Account is a tax-advantaged account, meaning the investments in it grow without annual taxation. All taxes are generally deferred until withdrawal. The first withdrawal opportunity will come at age 18.
These accounts come with important limitations. Investment options are restricted to low-cost index-style funds from a pre-selected list, and total private contributions are capped at $5,000 per year per child regardless of how many people contribute. In other words, parents, grandparents, and others share that annual limit, it is not $5,000 per contributor. Funds are largely locked up until the child reaches adulthood, and after age 18 the account transitions into one that is similar to a traditional IRA.
From an estate planning perspective, this is not a substitute for a revocable living trust or other planning strategies. A trust allows you to control how and when assets are distributed, allows for protection of young people by choosing trustees to manage their inheritance, if done properly keeps heirs out of probate court, allows for the private transfer of real property, and provides creditor protection to heirs. A Trump Account does none of that, it is a fixed, statutory investment account with limited flexibility.
For most families, this is best viewed as a supplemental tool. It may make sense to open one to capture the $1,000 federal contribution or to set aside a modest, long-term fund for a child. Use of a Trump Account should be coordinated with your broader plan, including your trust, beneficiary designations, and any 529 accounts for a child’s education, or other gifting strategies.
The bottom line: for Oregon families, a Trump Account can be a small piece of the planning puzzle, but it is not the plan itself.