Summer Solstice… With Savings! | Wealth Planning Update

Summer is officially underway and bringing the heat and our team is channeling that same energy into your financial future. This month ahead of July 4th, we’re turning up the temperature on next-generation savings strategies to help you make the most of the season and beyond.

New Way to Save For Your Children & Grandchildren

Under the One Big Beautiful Bill Act passed last July by Congress, a new next generation account type was created. These new savings accounts are called “Trump Accounts.”

What exactly are Trump Accounts? They are a tax-deferred investment account for minors and there are a few components that make them unique. A significant benefit is specific to those born between January 1st, 2025, and December 31st, 2028 – they are eligible to receive a one-time $1,000 federal pilot program contribution from the Treasury Department. So, if you or a family member had a child born after January 1st, 2025, we would encourage you to open an account for them to receive the free $1,000 contribution. If you have children born before 2025, you can still open an account for them as long as they are under the age of 18, however, they won’t receive the $1,000 contribution.

How Does It Work?

It is important to understand how these accounts work and why you should consider opening a Trump Account. You may contribute up to $5,000 per year in after-tax dollars and invest those funds in low-cost ETFs that track a stock index such as the S&P 500. If your child is eligible for the $1,000 deposit, you can contribute $5,000 on top of the initial $1,000 contribution for a total of $6,000 in the first year. But here’s the kicker: those funds grow tax-deferred until they are withdrawn. Unlike IRAs, there is no earned income requirement, and anyone can contribute to them as long as the $5,000 limit is not exceeded. The accounts are held by a parent or legal guardian serving as a custodian until age 18. The accounts can then be converted to an IRA, subject to IRA withdrawal rules with some exceptions.

To open an account, you can fill out an IRS Form 4547 today directly on the IRS website. After the IRS form is completed and submitted, you’ll then be eligible to begin activating the new account via the new Trump Account app. Since this is a brand-new account type, there will be a learning curve and IRS guidance will likely be released in the future (we’ll keep you abreast of these changes as they happen in real time). But again, these are excellent savings and growth vehicles for younger families. Plus, who doesn’t enjoy a free $1,000 in their pocket?

If you have children or grandchildren that you are saving for, 2026 is a great time to revisit custodial accounts. 529 plans received a meaningful upgrade through the One Big Beautiful Bill Act as well.

OBBBA & 529 Accounts

OBBBA introduced significant enhancements to how families can leverage 529 plans. A short summary is included below:

• Higher K–12 Withdrawal Limits – Effective Jan. 1, 2026, the annual withdrawal cap for K–12 education expenses increase from $10,000 to $20,000.
• Expanded Qualified Expenses – 529 funds can now be used for non-tuition K–12 expenses including curriculum materials, fees for nationally standardized tests, books and instructional resources, dual-enrollment course costs, online educational programs, test prep, tutoring and specialized services for students with disabilities.
• Post-Secondary Credentialing Expenses – 529 eligibility now extends to tuition for credentialing programs. It includes approved programs listed under Workforce Innovation & Opportunity Act (WIOA) at the state or federal level, as well as certifications from recognized professional providers such as CPA, EMT designations, or even those from trade or technical schools. It also covers books, exams, and supplies. Continuing Education (CE) units for teachers, real estate agents and insurance professionals have been added as well.

In addition, the Roth IRA rollover provision is now well-established; as a reminder, if a 529 has been open 15+ years and the funds aren’t needed for education, up to $35,000 can be rolled into a Roth IRA for the beneficiary over their lifetime — a great backstop for families worried about overfunding. For our CA clients specifically, California still does not offer a state income tax deduction for 529 contributions, so the advantage is purely on the federal side — but that’s still meaningful given the tax-free growth and tax-free qualified withdrawals.

It is worth noting that there is a pending CA bill (SB 529) that would introduce a state deduction of up to $10,000 for joint filers beginning in 2026, with income limits — something we’re keeping an eye on and will update you on if it passes.

On the custodial account side (UGMA/UTMA), these remain a great complement to a 529 — especially for families who want flexibility beyond education expenses. The assets belong to the child and can be used for anything once they reach adulthood (18 or 21, depending on the state). The tradeoff is taxes — earnings are subject to the kiddie tax rules, and a custodial account has a heavier impact on financial aid eligibility: a $50,000 UGMA reduces aid by roughly $10,000 vs. only ~$2,800 if that same money were in a 529.

Think of all three account types to amplify the financial impact for your child, depending on your cash flow and long-term needs and goals. They are not mutually exclusive and families who are considering their legacy intentions could consider layering all three. A 529 for tax-free growth in education-specific accounts, a custodial account for general long-term wealth building in the child’s name, and a Trump account as a government head start that sits underneath it all.

As always, feel free to reach out to your advisor if you’d like to walk through which combination makes sense for your situation. Our entire team is here to support you with any questions about your portfolio or holistic wealth planning strategy.

We hope this Wealth Planning Update has been helpful. If you’d like to revisit planning with our team, please don’t hesitate to reach out. If you think this update would benefit a colleague, friend, or family member, please feel free to share it. If you have a friend or family member who is interested in a no-cost portfolio review, please let us know.

Thank you again for your continued vote of confidence in our work.

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