September 1, 2025
“Trump Accounts” as a New Divorce Planning Tool to Fund College Education
Although not intended specifically to help divorcing families, Trump Accounts may be a useful tool for divorcing couples concerned about saving for a child’s education. Here are the basics:
Among the many provisions introduced by President Trump’s signature legislation, the One Big Beautiful Bill Act, is the launch of a new type of account designed for kids. Known as “Trump Accounts,” these are tax-advantaged investment accounts that parents will soon be able to open on their child’s behalf to start saving and investing. As an added bonus, kids who meet certain requirements will receive a free $1,000 from the federal government to seed the account.
What are Trump Accounts?
The Trump Account is a special trust designed to give children a head start financially. Parents, among others, can contribute up to $5,000 annually until the child turns 18, which is then invested in the stock market. A parent’s employer can also contribute up to $2,500 a year to the account, and it will not count as taxable income. But because contributions are made with after-tax dollars, there is no tax deduction.
Account holders can access the funds once they reach the age of 18. At that point, the accounts are treated much like a traditional IRA wherein the money grows tax-deferred and withdrawals are taxed as regular income, plus a 10% penalty if you take the money out before age 59½.
There are some exceptions, though, including penalty-free withdrawals for expenses resulting from disability, domestic abuse or a natural disaster. There is also a $10,000 exception for new home purchases, and $5,000 can go toward a baby of their own.
But where the Trump Account option might have the most utility for a divorcing couple is the option to make penalty-free withdrawals to fund higher education expenses.
Who is eligible?
Technically, any parent can open a Trump Account for their child. But only children born after Dec. 31, 2024, and before Jan. 1, 2029, who are U.S. citizens and have a Social Security number, are eligible to receive the one-time government contribution of $1,000.
Closing
The accounts aren’t expected to become available until July 2026 and the details of how the accounts will be opened and funded remain to be seen. But every parent wanting to address college funding as part of the divorce should discuss the Trump Account option with their attorney and their spouse.
« Back to all news