20 Jul TRUMP ACCOUNTS – IMPACT ON REPORTING GIFT TAX AND PUBLIC BENEFITS
As part of the One Big Beautiful Bill, the U.S. government is permitting the establishment of Trump accounts whereby the government will give $1000 to children born in the U.S. on or after January 1, 2025 until January 1, 2029. Others can generally contribute up to a total of $5000 annually and the assets held in the account (which are invested in low-cost funds that follow the S&P 500 to encourage capitalism) will grow tax deferred. Distributions (which can only be distributed after the age of majority) are subject to capital gains tax.
Usually the person who makes a gift is responsible for filing a gift tax return if the gift exceeds the annual exclusion (presently $19,000 in year 2026). If it exceeds that limit, then you can use your lifetime gift, estate and generation skipping transfer tax exclusion which is presently $15,000,000.
A recent Revenue Procedure Ruling gave the conditions where reporting of the gift is not required:
- Taxpayer is an individual
- The only taxable gifts are cash contributions by the donor (taxpayer) to one or more Trump accounts that are made before the calendar year in which the beneficiary turns 18.
- The taxpayer’s total gifts to each minor who is a beneficiary do not exceed the annual exclusion (presently $19,000). So, if a grandparent contributed $5,000 to Trump accounts to 3 grandchildren and gave no more than an additional $14,000 to any of the grandchildren for the rest of the calendar year, then a gift tax return would not be necessary. However, if the taxpayer gave more than $14,000 to any of the 3 grandchildren (in addition to the Trump account gift of $5,000), then a gift tax return would be needed, and the donor taxpayer must report Trump contributions as gifts of future investments.
If less than the annual gift tax exclusion as mentioned in (c) above is made, then there would be no gift or generation-skipping transfer tax liability.
If in compliance with this Revenue Procedure, then each transfer would be considered completed and not subject to gift or GST tax reporting. Otherwise, it would be considered a future interest and a report would be due.
If a minor receives Supplemental Security Income (SSI) and Medicaid (which is means-tested), a Trump account is not a countable resource during the growth period which ends on December 31st in which the child beneficiary turns age 17. However, due to deeming of parents’ resources to the child, this will happen infrequently.
There can be no distribution to the SSI recipient from the Trump account to be excluded. However, a rollover to an ABLE account (an account that also does not count as a resource for Medicaid for those who are disabled before age 46) in the year the child turns age 17 is not considered a distribution (although this is to be clarified at a later date).
Contributions to the Trump account of the SSI recipient will not be treated as income (exclusive of Social Security being direct deposited into the Trump account) which also means a representative payee cannot make a direct deposit into a Trump account as the Social Security payments are for current maintenance and support.
There is presently no clarity on how the funds are to be treated for public benefits purposes after the growth period. There may be future planning opportunities for rollover of Trump accounts to ABLE accounts or Special Needs Trusts.
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