By Robert E. Quittner, Jr. CFP® & CMFC™
Investment Advisor Representative
[email protected]
With the 4th of July behind us, we are officially in the thick of summer. The triple-digit temperatures over the weekend certainly reminded us of that.
For financial planners, July 4th also marks the first anniversary of the One Big Beautiful Bill Act being signed into law. So why am I bringing this up today? While there were 60 major tax provisions in the bill, one change was not available until July 4th of this year: Trump Accounts. Now that these accounts are officially open, it’s a good time to understand how they work and where they may fit into your financial goals.
One of the most popular ways to fund college has been contributing to a 529 college savings plan. Parents and grandparents also use non-retirement brokerage accounts to save for college. Let’s look at how each account works, along with the advantages, disadvantages, and planning considerations of each.
Here’s how Trump Accounts work:
- Kids born between 2025 and 2028 will receive a $1,000 “starter gift” automatically from the federal government.
- You (and other family members like aunts, uncles and grandparents) can contribute a total of $5,000 per year per child through age 17.
- The money grows tax-deferred by investing in a limited selection of low-cost index funds and cannot be withdrawn prior to age 18. After age 18, these accounts will be subject to similar rules as traditional IRAs, including taxation.
What can the money be used for?
Funds can be used for anything, though a 10% tax penalty may apply if withdrawn before age 59 ½. Exceptions include college expenses, first-time home purchases (max $10,000 lifetime), total and permanent disability, terminal illness, health insurance while unemployed and a few other uses. Even though the 10% penalty is waived, ordinary income tax still applies.
Some employers are already getting involved. Dell, for example, announced a $1,000 match for employee contributions into Trump Accounts.
We often help clients plan for their grandkids’ future so it’s worth noting the concerns or limitations of using Trump accounts.
Opening Authority
- One potential pitfall for grandparents is that they are last in the proposed priority order for opening a Trump Account. The order is legal guardian, parent, adult sibling, then grandparent. This means grandparents should not assume they will be the person who opens the account. Families should discuss ahead of time who will establish it so everyone understands the process. If preserving that option is important, families should discuss in advance who will open the account once it becomes available.
Loss of Flexibility
- Once assets are contributed to a Trump account, the money belongs to the child. You cannot take it back or change beneficiaries. A 529 plan, by comparison, allows the beneficiary to be changed to another qualifying family member.
Child Controls Funds
- Once the child reaches adulthood under the account rules, they ultimately control the money. You cannot prevent withdrawals or direct how it is spent beyond statutory restrictions.
Limited Investment Options
- The investment choices for Trump Accounts are intentionally very limited. Unlike a regular brokerage account or even many IRAs, you cannot buy individual stocks, bonds, CDs, sector funds, or international funds. The law requires investments to be in low-cost, broad U.S. stock index funds or ETFs with expense ratios no higher than 0.10% and no leverage.
- As of July 2026, the Treasury has approved five investment options listed below.
| Fund | Investment | Approx. Holdings | Expense Ratio |
| SPYM (Default) | S&P 500 | 500 largest U.S. Companies | .02% |
| IVV | S&P 500 | 500 largest U.S. Companies | .03% |
| VTI | Total U.S. Stock Market | ~3,500 U.S. Stocks | .03% |
| ITOT | Total U.S. Stock Market | ~2,500 U.S. Stocks | .03% |
| SPTM | S&P 1500 Composite | ~1,500 U.S Stocks | .03% |
Contribution Limits
- Total annual contributions from everyone are capped (currently $5,000 per year), so grandparents need to coordinate with parents and others.
Now that we have covered the nuances of the Trump accounts let’s move on to overall planning. Before deciding which account to fund, first identify what you’re trying to accomplish. The “best” account depends entirely on your objective.
Start with the End in Mind
Is your goal to –
- Help pay for college?
- Help a grandchild (or child) purchase a first home?
- Build long-term retirement wealth?
- Transfer wealth during your lifetime?
- Maintain flexibility in case family needs change?
Here’s a Grandparent’s Guide: 529 Plan vs. Trump Account vs. Grandparent-Owned Brokerage Account. It provides some succinct information to compare which accounts may work best to achieve your goals. Keep in mind that you could allocate between two or three of these accounts and it is not a singular choice.
| Feature | Trump Account | 529 Plan | Grandparent-Owned Brokerage Account |
| Primary purpose | Long-term retirement/wealth building | Education savings | Complete flexibility |
| Who owns the account? | Child is the beneficiary; account is opened by an authorized adult | Grandparent (if they open it) | Grandparent |
| Who controls the money? | Limited control after opening; ultimately for the child | Grandparent | Grandparent |
| Can the money be used for anything? | Yes, but non-qualified early withdrawals may trigger taxes and a 10% penalty before age 59½ unless an exception applies | No (qualified education expenses receive the best tax treatment) | Yes |
| Tax-free growth | Tax-deferred while invested; qualified withdrawals receive favorable tax treatment under account rules. | Yes, for qualified education expenses | No (annual dividends, interest, and capital gains may be taxable) |
| Investment choices | Primarily diversified U.S. stock index funds | Wide variety of investments | Virtually unlimited |
| Annual contribution limit | $5,000 total annual contributions from all sources | High (varies by state and gift-tax rules) | No contribution limit |
| Can you change the beneficiary? | No | Yes | Yes |
| Can you get the money back? | No | Yes (but earnings may be taxed and penalized if used for non-qualified purposes) | Yes |
| Can you stop contributing? | Yes | Yes | Yes |
| If you die, does control continue? | No ownership transfers because the funds already belong to the child | Yes, if you name a successor owner | Yes, through your estate plan or Transfer-on-Death (TOD) designation |
| Can funds be used before age 18? | Generally, no | Yes, for qualified education expenses | Yes, whenever you decide |
| Financial aid impact | Still developing | Depends on ownership and current FAFSA rules | Depends on whether assets remain yours or are later gifted |
Every family has different priorities. Some want to maximize educational funding, others want to help with a first home, and others are focused on efficiently transferring wealth. We’d be happy to help you determine which combination of accounts best aligns with your family’s goals. Reach out to myself, Peter, Kyle, Jeremy, or Nick. With a few smart moves now, you can help set your kids and grandkids up for a more flexible, financially secure future.
Enjoy your weekend!
Rob