Trump Accounts are scheduled to begin accepting contributions on July 4th, and a number of clients have already reached out asking whether one is worth opening for their kids or grandkids.

The short version: they’re a genuinely useful addition to the savings landscape, but they’re unlikely to replace the accounts most families already rely on, such as 529 plans, Roth IRAs, and custodial accounts. Here’s what you need to know:

At a Glance

• Who can open one: Parent or legal guardian of a child under 18 with a Social Security Number
• Annual contribution limit: $5,000 (after-tax dollars; no upfront tax deduction)
• Government contribution: $1,000 for children born January 1, 2025 – December 31, 2028
• How it grows: Tax-deferred (no annual tax on investment gains)
• When funds can be accessed: Generally age 59½, with limited exceptions
• What it becomes: Depending on the custodian, it could convert to a traditional IRA at age 18

What Is a Trump Account?

A Trump Account is a new investment account for children, built around one headline feature: a one-time $1,000 contribution from the federal government for children born between 2025 and 2028.

From there, parents, grandparents, friends, and in some cases, employers can add to the balance. Unlike a custodial Roth IRA, a retirement savings account that requires the child to have earned income from a job, anyone can contribute to a Trump Account regardless of whether the child works.

How Do These Accounts Work?

Contributions are capped at $5,000 a year, made with after-tax dollars. The money is meant to stay invested, not spent young. Withdrawal rules work like retirement accounts rather than something like a 529, and when the child turns 18, depending on the custodian, the account could convert automatically into a traditional IRA.

For now, the investment menu is limited to low-cost funds tracking broad U.S. stock indexes like the S&P 500, though more options are expected over time.

 What’s Appealing About Trump Accounts?

For eligible families, the free $1,000 is the easy part of the pitch – it’s money you don’t have to contribute yourself.

Opening an account at or near birth gives savings the benefit of time, allowing decades of tax-deferred growth before the funds are used. It also provides family members with another thoughtful way to contribute to a child’s future, alongside more traditional gifts such as savings bonds or graduation checks.

Where We’d Be Cautious

The tradeoff is that these funds are intended for long-term retirement savings, which can make them less flexible than other savings vehicles.

A few things worth weighing before treating it as more than a supplement:

• For education costs, a 529 plan remains the best option with tax-free growth and withdrawals for qualified expenses.
• For a child with earned income, a custodial Roth IRA typically offers more flexibility and a higher contribution ceiling.
• For goals outside of retirement, a UTMA or UGMA account provides substantial flexibility to withdraw funds before age 18, without the IRA restrictions.

In short: Trump Accounts are built for the long game. If flexibility or education funding is the goal, other vehicles are still the better fit.

Who Should Consider Opening a Trump Account?

This type of account makes the most sense if you:

• Have a child born between 2025 and 2028, so you qualify for the $1,000 federal contribution.
• You are already maxing out a 529 plan and want another long-term savings vehicle.
• You’re a grandparent looking for a more structured alternative giving a cash gift.

Our Take

There are many ways to save for a child’s future, and the right approach depends on your family’s goals and circumstances.

For families with an eligible child or grandchild, the $1,000 federal seed contribution makes a Trump Account worth considering as it’s an opportunity to receive funds that otherwise wouldn’t be available to you.

If you’d like to think through options together, reach out to your Crestwood team.

Contact Us

 

This document is provided for general informational purposes only by Crestwood Advisors, an investment adviser. Crestwood Advisors does not provide legal advice, and this document should not be construed as containing legal advice. For legal advice, consult with a licensed attorney. This document should not be construed as containing tax advice. For tax advice, consult with your tax adviser. Account rules and features are subject to change as guidance evolves.

Sources:

https://trumpaccounts.gov/
https://www.investor.gov/introduction-investing/investing-basics/investment-accounts/tax-advantaged-accounts/trump-accounts
https://home.treasury.gov/news/press-releases/sb0508

As we approach year end, this guide highlights essential financial considerations, offering actionable steps and practical advice to help secure your family’s financial well-being.

Smart Tax Planning Strategies

Year-end tax planning can yield substantial savings for families who take a proactive approach.

• Charitable giving can play a crucial role in tax planning. Consider a Donor Advised Fund (DAF) to bunch multiple years’ worth of charitable contributions into a single tax year to maximize the benefit of itemizing deductions.
• If you are over 70½, qualified charitable distributions (QCDs) from IRAs of up to $105,000 per individual or $210,00 for a married couple filing jointly can satisfy required minimum distributions (RMDs) while providing tax advantages.
• Consider a Roth Conversion to convert IRA dollars into Roth dollars which will grow tax free going forward.

Estate Planning for Family Security

Estate planning extends far beyond a simple will creation. A comprehensive estate plan ensures your assets are distributed according to your wishes while minimizing tax implications for your heirs.

• Review and update wills and other directives.
• Check beneficiary designations on retirement accounts and life insurance, including contingent beneficiaries.
• Consider establishing or updating trusts (especially considering state estate taxes).
• Review powers of attorney and healthcare directives.
• Evaluate gifting strategies for tax efficiency.
• Consider charitable giving vehicles.

Maximizing Retirement Security

Now is the time to review your contribution levels to workplace retirement plans and Individual Retirement Accounts (IRAs). In November, the IRS announced a significant changes for 2025, including raising the limits for catch up contributions for workers age 60 to 63.

• If you are not maxing out your 401(k), at a minimum, ensure you are contributing enough to receive your employer’s maximum matching contribution.
• If you have set a fixed contribution amount, review and adjust your contributions for 2025 to ensure you reach new annual limits.
  • 401(k): $23,500 ($31,000 for those 50 and older and $34,750 for those age 60 to 63)
  • IRA: $7,000 ($8,000 for those 50 and older)
  • Consider making these as Roth contributions if your future income/taxes will be higher.
• Review investment allocations to ensure they align with your risk tolerance and timeline.

Secure Your Family’s Future Through Insurance

Insurance coverage forms a crucial part of your family’s financial safety net. The end of the year presents an ideal time to review your insurance policies and ensure they still align with your family’s needs.

• Life insurance coverage should reflect your current family situation, including any changes in dependents, income, or debt obligations.
• Health insurance decisions take on particular importance during open enrollment periods. Consider whether your current health plan still offers the most cost-effective coverage for your family’s medical needs.
• Consider maxing out contributions to a tax-efficient HSA plan if you are eligible ($4,300 for an individual or $8,550 for a family in 2025).
• Often overlooked, long-term disability insurance, deserves consideration as it protects your income should you become unable to work.

Strategic Debt Management

In today’s dynamic interest rate environment, smart debt management can significantly impact your family’s financial health.

• Review all outstanding debts, from mortgages to credit cards, for opportunities to reduce interest costs through refinancing or consolidation.
• If you have high levels of consumer debt, consider creating a structured debt repayment strategy that balances aggressive debt reduction with other financial priorities.
• Mortgage holders should evaluate whether current rates and terms still serve their best interests.

Remember that not all debt is created equal – focus first on eliminating high-interest consumer debt while maintaining strategic use of lower-cost debt that might offer tax advantages.

Education Planning using 529 accounts

Saving for education can help prepare bright young minds for a fulfilling future career. If you plan to help fund the cost of a university degree, consider the following:

• Review contribution limits and state tax benefits.
• The 2024 Federal Gift Tax Exemption is $18k per giver, per receiver (a couple can gift $36k to a child’s 529 plan). This increases to $19k in 2025.
• Consider front-loading 529 plan contributions (up to five years-worth all at once). Please consult with your tax accountant on how to report these contributions.
• Evaluate investment allocations based on children’s ages.
• Explore options for unused 529 funds, including transfers to siblings or a Roth IRA.

Emergency Fund Assessment

A cornerstone of any sound financial strategy remains a robust emergency fund. While the traditional advice of saving three to six months of essential expenses holds true, today’s higher interest rates present a nice opportunity. High-yield savings accounts offer the opportunity to earn meaningful returns while maintaining liquidity.

Family Financial Communication

An open dialogue about family finances builds stronger financial futures for the next generation. Set aside time for family financial discussions, adapting the conversation to include children at age-appropriate levels. These discussions can cover everything from daily spending decisions to long-term financial goals.

• Schedule quarterly or semi-annual family budget reviews.
• Use age-appropriate financial language for children:
  • Ages 5-10: Basic saving and spending concepts, including giving
  • Ages 11-15: Introduction to investing and compound interest
  • Ages 16+: Credit, college planning, Estate planning basics
• Discuss family values and money relationships.
• Plan family philanthropy initiatives.
• Create financial responsibility transition plans for teens.
• Review family business succession planning if applicable.

Take Action

Successful financial planning requires taking concrete steps toward your goals. Begin by making any necessary year-end contributions or adjustments to investment accounts. Update important documents and beneficiary designations. Set specific, measurable financial goals for the upcoming year. Finally, consider where Crestwood’s professional financial guidance might help you navigate complex financial decisions.

Remember, financial planning is an ongoing journey, not a destination. Regular reviews and adjustments will help ensure your family remains on track to meet both immediate needs and long-term aspirations.

This document is provided for general informational purposes only by Crestwood Advisors, an investment adviser. Crestwood Advisors does not provide legal advice, and this document should not be construed as containing legal advice. For legal advice, consult with a licensed attorney. This document should not be construed as containing tax advice. For tax advice, consult with your tax adviser.

The importance of Financial Education in Wealth Transfer

Creating generational wealth involves more than just passing on financial assets. It’s about preparing the next generation to nurture their legacy and focus on managing and growing wealth responsibly. Focusing efforts on financial education at an early age is key to setting younger generations up for success.

One of the biggest challenges is educating the next generation on important issues like financial literacy, self-discipline, and wealth preservation. How do families start this conversation with their heirs? Will they understand these concepts at a young age? While these conversations with the next generation can be difficult, there are avenues to facilitate productive discussions.

Interactive Engagement to Ignite Young Imaginations

There are many resources such as Mint, Smart About Money, Monarch and Greenlight, that teach young children about financial literacy and investment concepts through interactive engagement. With technological advancements, introducing them to online tools can help automate and simplify their financial management. Many programs offer family-friendly curricula, multimedia learning centers, games, and budgeting tools, making financial education both enjoyable and accessible.

Incorporate philanthropic endeavors into your conversation. What are their hobbies and how can this tie into charity? With the holiday season approaching, this could be an opportune time to bring up how they may give thanks as part of a philanthropic approach.

Transforming Financial Responsibility into Opportunity

Infusing relevance, excitement, and collaboration into discussions with your children can ease the weight of financial conversations. Reframing specific conversations to empower them will allow for greater results. For example, rather than saying “you need to learn about budgeting so you can save more”, you can try “what would you like to buy so we can talk about saving to pursue your goal”. This type of collaboration will induce trust and relationship building, while discussing the importance of being financially prudent. Share your childhood stories with them. This can provide them with a sense of connection and understanding on your accomplishments.

Building Healthy Financial Habits

Building best practices and habits as early as possible will make an impact. Prioritize saving by creating a goal. Whether it’s saving for that pair of sneakers or saving $10 per week for an emergency fund. When they start working, prioritize saving by automatically setting aside a portion of their income for savings before allocating funds to other expenses. Prioritize participation in employer-sponsored retirement plans, such as 401(k) plans, especially if the employer offers a matching contribution. Maximizing employer matches provides a significant boost to retirement savings. Demonstrating the effects of compounding at an early age can be eye-opening, and instilling sound financial practices and habits from an early age can make a lasting difference.

Conclusion: Preparing the Next Generation for Success

Connecting your heirs with financial advisors opens the door to meaningful dialogue about money management. By involving professionals, young children can gain insights and learn directly from experts, making financial concepts more relatable and understandable. Reach out to your Crestwood Team to explore ways to engage the next generation effectively.

The Tax Cuts and Jobs Act (TCJA) of 2017 significantly changed the U.S. tax code, impacting individuals and businesses. As we approach the potential sunset of many provisions at the end of 2025, high net-worth families must prepare for potential shifts back to pre-TCJA rules. The TCJA lowered income tax rates, doubled the estate tax exemption, and altered various deductions and credits. The expiration of these provisions would revert to higher tax rates and a lower estate tax exemption. In light of this, these areas are worth considering:

Tax rates.  First and foremost, the potential increase in individual income tax rates impacts every taxpayer. The TCJA reduced the top marginal tax rate from 39.6% to 37%. High-earning individuals may need to consider strategies such as accelerating income, utilizing Roth conversions, or harvesting capital gains at lower tax rates.

Deductions.  Changes to the state and local tax (SALT) deduction and personal exemptions would also impact tax planning. The TCJA capped the SALT deduction at $10,000, significantly impacting taxpayers in high-tax states. If this cap is lifted, taxpayers in those states may benefit from increased deductions. Additionally, the return of personal exemptions, eliminated under the TCJA, could provide further tax relief.

Corporate tax rate and qualified business income.  Business owners should prepare for changes in corporate tax rates and deductions. The TCJA reduced the corporate tax rate from 35% to 21%. Pass-through entities that benefited from a 20% deduction on qualified business income (QBI) may also see this deduction disappear.

Estate tax exemptions.  The estate tax exemption stands at $13.61 million per individual in 2024, allowing couples to shield nearly $27.22 million from estate taxes. If the TCJA provisions expire, this exemption would drop to approximately $5 million per individual, adjusted for inflation, to roughly $7 million per person. This would result in more estates subject to the 40% federal tax. High net-worth families should consider strategies such as gifting, utilizing trusts, and other wealth transfer techniques to minimize the potential tax burden on their heirs.

The possible sunset of the TCJA presents a complex landscape for high-net-worth clients. Proactive financial planning will help navigate changes in tax laws. Contact your Crestwood Advisors team today to discuss how potential changes might affect you and to develop a plan tailored to your circumstances.

Source: Henry-Moreland, B. (2024). TCJA Sunset: Planning For Changes In Marginal Tax Rates. Nerd’s Eye View | Kitces.com. https://www.kitces.com/blog/tax-cut-and-jobs-act-tcja-sunset-marginal-tax-rates-personal-exemption-phaseout-pease-limitation-qbi-deduction/

The above is provided for general informational purposes only by Crestwood Advisors, an investment adviser. Crestwood Advisors does not provide legal or tax advice, and this document should not be construed as containing legal or tax advice. For legal or tax advice, consult with a licensed attorney or accountant.

By being thoughtful and strategic with your philanthropy, individuals can achieve their charitable goals while also being tax efficient and fostering future financial growth. Here, we explore effective charitable giving strategies and highlight how Crestwood Advisors can support your journey towards impactful giving.

Be strategic with your giving to maximize tax benefits

Donating appreciated securities allows you to avoid capital gains taxes while securing a charitable deduction for the asset’s full market value. Additionally, contributions to qualified charitable organizations are deductible from income taxes, providing immediate financial benefits. Collaborating with your Crestwood advisor can ensure you are giving as tax efficiently as possible.

Leveraging Donor-Advised Funds (DAFs)

When donating cash, securities, cryptocurrency or other assets into a Donor-Advised Funds (DAFs), donors receive an immediate tax deduction but can make grants to charities over time. One key advantage of DAFs is flexibility: donors can contribute in one year and then decide on the timing of gifts across one or more years. Additionally, unused funds within the DAF can be invested, maximizing the impact of your charitable giving. Administrative ease (no more keeping track of all those individual donations throughout the year!) and potential for growth make DAFs a powerful tool for integrating philanthropy into long-term financial plans.

Planning for Legacy Giving

Legacy giving, or planned giving, involves integrating charitable bequests into estate plans, ensuring your philanthropic goals endure beyond your lifetime. By designating a portion of your estate to charitable organizations, you can leave a lasting impact while potentially reducing estate taxes. Legacy giving ensures your charitable vision continues to benefit future generations.

Implementing Charitable Trusts

Charitable trusts, such as Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs), offer structured approaches to philanthropy while delivering significant tax benefits. A CRT provides an income stream over a specified period, with the remainder distributing to charity upon the beneficiary’s death. Conversely, a CLT allocates income to charity for a set term, with remaining assets eventually returning to you or your beneficiaries. These trusts are ideal for aligning charitable intentions with personal financial planning goals in 2024.

Exploring Qualified Charitable Distributions (QCDs)

Individuals over 70½ years old can donate up to $100,000 directly from their IRAs to qualified charities without incurring income taxes on the distributions through Qualified Charitable Distributions (QCDs). This strategy not only satisfies required minimum distributions (RMDs) but also significant tax benefits while supporting charitable causes directly.

Ready to transform your philanthropic impact in 2024?

Contact your team at Crestwood Advisors today to discuss how we can help you develop a charitable giving plan that aligns with your financial goals and maximizes your philanthropic impact.