[00:02] all seven of my children for Trump accounts. And as the CEO of an over 9 figure company, you might be wondering, Kevin, why? Well, [laughter] in this video, I'm going to break down exactly why. We'll do it in a noob concept
[00:15] versus proconcept format, so that way we can see those takeaways really easily. skepticism about these Trump accounts because they have a political label of Democrats are like, "Oh, well, Democrats are just going to kill the
[00:29] Trump program anyway. It doesn't matter." I don't think so. And let me just start there and diffuse this. First of all, a lot of people are signing up for these even though their children do not qualify for the bonus $1,000. None
[00:41] of my seven children qualify for the bonus $1,000. Not born during the Trump missed the deadline. [laughter] Born a little too early. Oh well. Ovarian lottery. didn't win it [laughter]
[00:54] the point is 6 million children have already signed up in the initial week of the Trump account program and only 1.4 million of those actually qualify for the extra thousand. So obviously a lot of people see there's a reason or
[01:08] rationale to sign up here more so than just that extra thousand bucks. Especially since families have already contributed over $50 million. I expect actually haven't even contributed yet
[01:20] setting everything up perfectly, but the accounts are already open, so ready to wire it on over. So, here's how it works and my thought on answering the Democrat concern question first. Won't the next administration just kill this? I don't
[01:34] think so. I don't actually think politicians uh like to rugpull tax benefit programs like this, especially when they have to do with children. Not saying it won't happen or can't happen, but I know that Ivanka Trump pushed the
[01:48] doubling of the child tax credit back in the first uh T1 administration, and Democrats kept that and briefly actually extended it to $3,600 in 2021. So, the
[02:00] complicated ones like a tax program like this that also has a lot of public support, like market support, uh these usually stick around. greater concern is a lot of people invest into the S&P 500 index fund that your Trump account money
[02:15] there's some big great recession and then you know for three years people are like [laughter] losers down 40% and you're talking about a newborn. [laughter] Welcome to capitalism. Uh but I really want to start with kind of the
[02:29] big big big takeaway. So that's kind of just laying some quick foundations. Big takeaway number one here. Frankly, the greatest noob take that I've seen is people just saying, "Hey, just go fund everything with your personal after tax
[02:44] account." I think that's a a noob take. You know, you paid taxes, you have it in your savings account, you pay it. I think there is a serious opportunity to sit down and think about how you can run this through a side hustle that you
[02:56] have. I personally believe that everybody should have a side hustle so not be able to write off otherwise. If you have a side hustle, you're able to now write off things like portion of your home, portion of your utilities,
[03:09] your phone, part of your car, your laptop, anything necessary and ordinary for your business or like you know work uniform, right? So the point here is if you have a business, the proake, especially if you have an escorp, the
[03:25] protake is you're going to contribute up to $2500 per employee and or child. I'll explain that in just a moment. pre-tax, which means you get a tax write off for which means you get a tax write off for doing it. The company writes it off
[03:40] and that could be contributed to the child's Trump account. So, let's explain we'll make a bottom line out of it because it's a pretty big point. All right, so let's say mom, dad, and two children work for this SC corporation,
[03:57] company, whatever it is. All right, we'll take this uh dirty white board we'll take this uh dirty white board here. Mom gets to contribute $2,500 to her children because she is an employee. She gets to contribute $2,500.
[04:13] Now, it's technically the company that's contributing it. The company is taking the write off. So, it's the company's contribution, but mommy can dictate who gets the money. Can daddy get it? No, daddy can't get it. The children can get
[04:29] it. Okay. Okay. Well, which child gets it? Whichever child you like more. It could be all $2,500 could go to kid one. All could go to kid 2. You could split it 50/50. You could do really whatever you want. You can allocate that $2,500.
[04:45] Uh, and that is a company contribution that you allocate. Now, daddy working for that company can do the same thing, which means the parents can contribute a combined $5,000 in this scenario to all of kid 1, all of kid 2, 60% to one, 40%
[05:00] combination you want, that money can go to these children into their trump accounts. Okay, cool. But now, let's say these children are also employees of the business. Well, remember how I said andor earlier? you are an employee and
[05:15] or child who is also an employee. Right? So, let's make that a little clear. If you're a child who's an employee, you can do $2,500 contribution from the can do $2,500 contribution from the company. If you are a parent and you are
[05:28] an employee of a business, that business can do a $2,500 contribution to that child, right? A child can contribute to their own employee account. uh a mom or dad can contribute to whatever children they want in whatever allocation they
[05:43] want. So in this example to keep it simple, let's say kid ch, you know, kid the business, they allocate to their own trump account. Same thing for kid 2. In this example, a business like an S corporation that would have ordinarily
[05:59] corporation that would have ordinarily taken $10,000 in income and sent it off as distributions and let's say they're in California, which would be crazy, but California, they pay like 50% in taxes potentially.
[06:13] They would be left with $5,000 after taxes. But now they get to write that taxes. But now they get to write that $10,000 off. The business gets a $10,000 write off and the children are left with $5,000.
[06:27] That's pretty awesome. So now the parents saved five grand and the kids got five grand in that scenario. That rocks. That's an example of how these Trump accounts are a massive hack. So let's simplify that a little bit in case
[06:43] any of that was confusing. Uh and it's just to make it really clear what the difference is and then we'll go to the next take. So, the noob take is if you next take. So, the noob take is if you have a Trump account, just send $2500
[06:57] to a child from your savings account and let them grow that money and in the future they'll pay some taxes on it. Total loser noob take when it comes to the new Trump accounts. The best thing to do is actually run it through an S
[07:11] corporation. Here's an example where if mom, dad, kid one, kid two work for a family side hustle, mom and dad can each contribute $2,500 to these children and
[07:23] the children can contribute $2,500 themselves to their own trump account. that's contributing, but in this example, the business could get a example, the business could get a $10,000 write off, which leaves that
[07:36] business with an extra $5,000 in distributions that would have otherwise gone to taxes. And in this case, that extra $5,000 goes into the children's accounts. This is why a lot of business owners are setting up Trump accounts.
[07:51] And that is the new verse pro strategy number one. [laughter] uh little things that go along with this. Uh you should have some form of a Trump account contribution program. Either a benefits attorney or AI can
[08:07] make sure you have some kind of uh paperwork to sort of back up what you're actually doing. Draft it, sign it, let everybody know about it, email it, whatever. Stick it in a file. Done. talk to an attorney about that to verify all
[08:21] you walk through all of those because you need that personal representation. Make sure you have that documentation. Now, it's also important to remember that generally this works for S corporations uh who are paying W2 wages.
[08:36] So, this could be for uh employees uh or um you know certain uh partnerships might qualify. Uh, this does get a little bit complicated or work murky if there are no W2 wages. So, it doesn't
[08:49] have to be an escorp. ESCOR is just usually where you see W2s. Sometimes you get LLC's with W2s as well. Just something to think about. Keep in mind, something to think about. Keep in mind, this is also different uh from the
[09:01] this is also different uh from the payroll tax like the FICA tax exemption that uh you could get if you have, let's say, an LLC that's employing people. That is different. just talk to AI about that if you have questions about that.
[09:13] That's where what some families will do is rather than having, let's say, their kids at an escorp, they'll put them through a family LLC and they'll be able to save on FICA taxes in doing so, as long as it's a pass through entity. I'm
[09:27] that's because we got to focus on the Trump accounts here. Okay. Uh, number Trump accounts here. Okay. Uh, number two, uh, the sort of first noob take I hear a lot out there is people hear there's a $5,000 cap and they think it's
[09:40] a family limit for a married filing joint couple, like jointly couple. It's really important to know that this is actually a $5,000 cap per child account. actually a $5,000 cap per child account. So, each child can get up to $5,000.
[09:54] That could be $2,500 from contributions from somebody else and $2,500 in contributions from themselves or via themselves as sort of being an employee or or however. Uh that's important to know, but it is a 5,000 cap. You can ask
[10:09] your scenario specifically to AI or an accountant or wherever you feel means. If you have three kids, that could mean $15,000 of contributions. Seven kids could mean $35,000 worth of contributions. The $2,500
[10:24] employee limit or employer contribution limit is per employee. And again, you could split it across children, however. Uh, so keep that in mind cuz some people hear this and they think, "Oh, I've got three kids, so I can only do a $2,500
[10:39] contribution." Nope. It's each, which is pretty freaking awesome. So, two working parents means two separate $2,500 allowances because the children each qualify for one and each parent qualifies for one. Uh, so useful to know
[10:53] qualifies for one. Uh, so useful to know that. That's tip two. Okay. Now, there are still some clarifications to be made from the IRS when there are multiple employers feeding the same child. So, we don't have details on that just yet.
[11:09] don't have details on that just yet. That's coming. Okay. Number three topic to keep in mind here. A lot of people hear Trump account and they click on an ad after googling and they're not going to the right place. There are very
[11:22] simple ways to do this. Uh the easiest in my opinion is you just download the Trump account app. I personally actually went through trumpaccounts.gov. I'll show you that as well. You could do it either way. Uh Trumpacount.gov
[11:38] just sends you to the app. Uh but there is also the Trump account IRS web page. Let me correct myself on that. It's Trump account IRS. It is form 4547.
[11:51] So taxpayer that should be here. 4547 is Donald Trump's, you know, name basically, right? President number 45 or presidential number. President number 45 and 47. And what you could do is you can use the uh filing system here. There it
[12:08] is. Okay, here it is. So IRS.com/Trumpac accounts. Okay, that's there. This is accounts. Okay, that's there. This is where I went. So Trump accounts, uh, you could sign in here. And after you sign in, you know, you got to do the driver's
[12:21] your, you know, they got to do all your matching. You got to have the socials. You got to make an ID.mme account. You could do this. If you go through this and fill out the paperwork, it probably take you 10 minutes to fill it all out.
[12:35] honestly do it while this video is playing. So, go to IRS.gov/trumpacounts. It's not sponsored or anything. You just go in there, fill out your information, so, you'll get an email that you're approved for the Trump accounts. The
[12:48] thing that was a little sus to me when I got the email was it felt like a Robin Hood marketing email. Like, it did not at all feel like it was a Trump account
[13:00] official IRS email. This is what it looked like. Like, I swear this to me just looks like a scam. All right. Welcome to Trump accounts. to complete your setup, activate your child's account. And I'm like, what? Robin Hood?
[13:13] How did Robin Hood get all my kids info and all this stuff? So, this is what you got to know. Robin Hood is the only way you could set up a Trump account right [laughter] that's a partnership they have. You want
[13:27] to use Fidelity, you want to use a different platform, sorry. So, the noob looking at this going, I don't know, man, this seems a little sus. The noob
[13:39] is clicking on ads and clicking off random things to get their Trump account money. The pro knows the best way to get the Trump account money is go to IRS.gov/Trumpac accounts or download the Trump accounts
[13:54] accounts or download the Trump accounts app in the app store. And that is only that's who the White House decided to partner with now. So, even though that partner with now. So, even though that seems like it's marketing, it actually
[14:07] is a Robin Hood partnership. Blew my mind. And all the data supposedly is secured and vetted by the Treasury Department. So, they've already got your social security number and your kids socials anyway. Kind of wild. Something
[14:21] to keep it in the back of your mind. So, point number four, data. Treasury Department supposedly saying they're protecting it all. They got it all then none of it's safe with them anyway. [laughter]
[14:33] Um, oh well, I guess. Point number five, uh, the free money. So, the free $1,000 will not show up automatically. The deposits do start hitting, uh, accounts
[14:45] in 2026, uh, including like the Michael Dell money. Uh, this does automatically show up depending on if you're in certain zip codes or the age of the child, but it does not show up instantly. and that government seed
[14:59] money does not count against that $5,000 annual cap. Worth knowing. That's point number five. Point number six, uh some people are like, "Look, I I don't really want to use Robin Hood." That's fine. In, you know, later this year
[15:13] supposedly, Fidelity says you're going to be able to transfer over to them. Schwab expects to be able to do that as well at some point. Uh I'm personally just leaving it at Robin Hood. It's easy enough for me. and they let you directly
[15:26] invest into SpyM which fun fact if you're not familiar with this a lot of people track the pricing of ticker symbol S spy spy or QQQ.
[15:39] All right, so you got SPY and QQQ. Okay, well these have fees expense ratios associated with them. SPY sits at nine um nine basis points, so you know 09%.
[15:52] And then QQQ is actually pretty um pretty up there. It's twice as expensive at8 for an index fund. And so if you just type in SPYM, you get a very very similar product even
[16:05] QQQM, throw that M after there, and you really get the non-marketed pro uh product which has a little bit of a lower which has a little bit of a lower expense ratio. So QQQM sits at 15 basis
[16:17] points instead of a uh 18. And look at this. SPYM, which is actually what the Trump accounts link up with, sits at just 0.02%. That's a really low cost for an index fund. Honestly, that's pretty
[16:32] impressive. And obviously, it's the S&P 500, so you know, it's uh 500 companies in the United States. Not not saying it's not subject to a crash, but uh it is uh it is a good product. The next point to know is uh some people think so
[16:47] that kids need a paycheck to be able to contribute to this. It's worth noting that no income is required for children. Anyone can contribute. You could actually contribute to anybody's uh Trump account if you don't. But
[17:00] children's trump accounts. There is though a hard cap of $5,000 per year per child from outside contributions or that child's contributions uh you know
[17:12] child's contributions uh you know through their employer combined max at 5,000. They do start increasing that limit with inflation after 2027. So probably in 2028 they'll say, "Oh, okay. That's going to go up by 5% now or 3% or
[17:26] whatever it is." You do not have a uh deadline grace period. So, you got to get that money in by December 31st. Really important sub point. Honestly, for point number seven, that should be like its own point. So, you know, don't
[17:41] deadline of next year. You got to get it in by December 31st. So, mark your in by December 31st. So, mark your calendar for that. Okay. Uh gift taxes uh contributions worth noting do qualify for the 19K annual exclusion just in
[17:55] case uh you're wondering about that. Uh there is also, you know, if you do that, it's also worth noting that if you super fund a 529 account, those could you
[18:07] could be robbing some of that exclusion by contributing here. Now, just to be by contributing here. Now, just to be exceptionally clear on the 529 gift tax exclusion because it gets complicated, it's worth clarifying that
[18:20] that company contribution of $2,500 that doesn't go against gift taxes. That's not a gift. It's only if after that a parent then wants to gift more money or somebody else wants to gift money to the child that affects the child's gift tax
[18:33] exclusion of that 19k. So, so keep that in mind. Now, final point, this is the big one, the endgame. What actually happens at 18. So, first myth number one, the money is locked up until they're 59 and a half. Wrong. Totally
[18:48] wrong. Not true. Number two, you get hit with a tax bomb right when they're 18. So they turn 18 and it's boom, here's the tax bill cuz you didn't pay money on any of this or taxes on any of this Trump account money. Also wrong. So
[19:02] here's how it works. Basically, you have an option to do lots of stuff. But you don't have to do anything. No tax bomb hits you until money actually leaves
[19:14] that account. So when a child turns 18, on January 1st of the year that they turn 18, a child can do three things. Door number one, they can keep the account. They could keep it compounding for decades and eventually it'll follow
[19:30] the retirement withdrawals plans after 59 12 and then they'll get into the mandatory distribution phase and they'll get taxed on this income as ordinary get taxed on this income as ordinary income. Super fine, chill way to do it.
[19:44] No problem, but maybe not the most optimal strategy. Door number two, cash it out. You take it, you pay the income taxes, you pay a 10% penalty cuz you are
[19:56] taking it out before 59 and a half, that's where the lockup myth comes from. And unless it's for college or buying a first home or whatever with up to 10k there are some exemptions for the penalty rules, you're going to pay those
[20:10] 10% and as penalties and you're going to pay taxes. That's door number two. So, you could leave it forever. Door number one. Door number two, pay the penalty, exemption for you at that time or for that child at that time. Door number
[20:22] that child at that time. Door number three, the smart strategy, the pro strategy some would say. Not to say the other strategies are newbie, they're just people don't think about this option. So option number three is you
[20:36] convert that retirement account to a Roth in that retirement account to a Roth in small windows. Now, in order to convert, sort of like a backdoor conversion, in order to convert, you have to pay taxes.
[20:51] order to convert, you have to pay taxes. So, the strategy is once the kids on their own, responsible for themselves, and they're not going to get covered by the kitty tax, right? This is important. Do not start big conversions while
[21:04] they're a student that you support because the kitty taxes that they're going to have to pay are going to be your tax rates and not theirs. So, don't supporting. Be careful with that nuance for the future. Talk to an accountant.
[21:17] Okay, this this stuff gets complicated. Instead, you convert it in small chunks during their first low income adult years and then you pay their 0 to 12% based on the standard deduction up to you know 12% or whatever 15% maybe if
[21:33] you're in California paying some lower taxes. That's usually the best option. So the first few years of their earnings, you want to be converting this account to a Roth. And the big goal there is you're now paying low taxes on
[21:46] this money that's been built up and now it can grow taxfree. That's the big dollar hala. So the funding order should really be take the free money if you can get the thousand bucks. Take the business deduction into
[22:01] the Trump account if you can get it. Take charity contributions to your kids accounts if other people want to send the money. Great. up to 5K in total. If the kid has income, they should fund their Roth. Then parents, in my opinion,
[22:13] should throw money into a 529 for education expenses, college, trade schools, whatever. If you want, you could throw money into this account, but the child is planning on lading or you're going to walk them through lading
[22:25] could just really just use a regular taxable account and you won't have some of those penalty concerns to worry about. So, there you go. full breakdown new vers pro on the Trump accounts. And if you liked it, this video is going to
[22:40] be the first video in our money and investing series. We're going to be calling it a sort of little miniourse uh on YouTube and it's just providing value on tax hacks and strategies [music] to help you save and make more money.
[22:53] >> Why not advertise these [music] things that you told us here? I feel like >> We'll we'll try a little advertising and see how it goes. you. >> Kevin Praath there, financial analyst
[23:06] and YouTuber Meet Kevin. Always great to get your [music] take.