Trump accounts are the latest financial product to become law. Let’s dust off our crystal ball and talk about possible divorce impacts.
What’s a Trump Account?
Officially known as 530A IRAs, Trump Accounts are a savings vehicle similar to a Traditional IRA. Parents and legal guardians can open a Trump Account for a child if they are not yet 18 years old and have a social security number. When the child turns 18, they can roll it over or take the money out with some limitations.
Free money!
The attention grabbing part of the accounts is the federal pilot program that gives $1000 to certain eligible children born after December 31, 2024 and before January 1st, 2029. So if your children happen to be born during this four-year period, good news, they get free money!
What happens if the parents get divorced?
The account is for the child and in the child’s name and so it will not likely be considered a marital asset. However, one or both parents will have to make decisions about the account at least until the child turns 18.
Going forward there will need to be provisions in the divorce decree to address future maintenance of these accounts. Some questions that will need to be addressed will include whether one or both parents will continue to contribute to the account, whether such contributions will be considered an expense for the child, whether the parents will be required to share information about the account, and possible prohibitions against rolling the account over.
How will this new financial account impact a divorce?
While these accounts are likely to be treated similarly to 529 plans for purposes of divorce there may be some differences. For example, if a parent’s employer is withholding income to fund the account, there may be disputes on how that income is counted for other purposes such as child or spousal support. Additional disputes may be caused by one party unilaterally making large contributions to a Trump Account prior to the divorce in an effort to reduce marital assets. We expect to see new provisions added to stipulations and divorce decrees regarding who controls the account, how contributions are handled, and whether rollovers will be allowed. Speaking to an attorney may unearth additional considerations.
The short version
Trump accounts are available and if you have a child born within 2025-2028, that child will get some free money from Uncle Sam. The money in the account is the child’s asset, however, expect to see provisions in divorce decrees regarding these accounts and who administers them.
Having an attorney that has both financial and legal knowledge in divorce is essential. As a Certified Divorce Financial Analyst, Elena Greenberg has both the financial knowledge and experience that you need in your divorce. Call Greenberg Law now and book a consultation!