It has already been this way with IRAs and ROTH IRAs. Nothing new or different about Trump accounts, they are just an inferior version of the other vehicles.
This is a key point that people seem to miss. The FAFSA application requires data from both the parents and the child applying to college in most cases. The Ivies and a few elites use a different, even more sadistic system for determining "need".
You want your children to be PENNILESS when applying for college. The very worst things you can do for them is either gift them money or allow them to have a balance in a checking or savings account. The kid's money is treated even harsher than the parent's money when it comes to student aid.
This is where well meaning parents have been scammed into doing the stupidest possible thing. NEVER open a 529 plan for your children. It's treated as an asset, thus punishing your kid via higher tuition and less need based aid than if they had no 529 plan at all. Oh, and most 529 plans are corrupt, squander their investors money, and force your kid to attend a limited group of schools.
What is the BEST thing you can do? 1.) The ROTH IRA, 2.) The Traditional IRA, 3.) The Trump Account, 4.) A Generous Grandparent owning a 529 plan.
Those 4 things are NOT disclosable on the FAFSA which means your kid can roll into college applications showing greater need. They can then use the ROTH IRA principle for college untaxed and undisclosed. They can use the growth of the ROTH IRA if taxed, without penalty, for college. (less good) They can use the principle and growth of a Traditional IRA without tax penalty, but they are taxed, for college. (less good) They can use the Trump Account the same as a Traditional IRA for education. (less good) Lastly, they can use a secret, undisclosed 529 plan owned by the Grandparents for college. (pretty good deal if your kid has wealthy grandparents)
If you don't follow these principles, your kid is in for a world of hurt trying to go to college and the parents are going to be on the hook for tremendous sums of money.
Example of how to F' it up your family real bad: Parents own their home, carry no debt. No car payments. You make above $200k as a family, the cutoff number. You save 25% of gross income between 401k and brokerage. Your kids are going to be expected to receive from you, roughly a $90,000 expected family contribution per year, per kid for university. That's full rack-rate tuition at any Ivy League university in the country. ZERO need has been established, you're F'd, even though that is probably more than you spend post-tax to run your household for the whole year. Oh, and your kids can only legally get a $5000 loan in their own name every year, so the system is expecting you as the parent to cough up $85,000 or co-sign a parent plus loan in your name. You make the problem even worse if your kids have any savings. You make the problem much worse if you pay your kids or they work elsewhere beyond the $13,000 poverty line per year. You make it even worse if you have a 529 savings plan.
In the very, very common scenario above what do the institutions expect you to do as a parent? Mortgage your home, sell your primary residence, or co-sign hundreds of thousands in debt for each of your kids. <- That's how the system works.
ROTH IRAs are the #1 shelter that reduces these obligations. Making sure your primary residence has Farm write-offs is probably the 2nd best strategy. Ensuring you liquidate all your brokerage securities and buy art/silver/gold/coins/stamps before they file their FAFSAs is a legal and common third best strategy. Going into temporary debt for deferred expenses on your home is probably the best 4th. Trump accounts would probably be the 5th or 6th best idea.
We've done most of the above strategies, but we've also tried a few others that appear to have worked out well. We consumed some of our daughter's college savings to send her to ACT/SAT boot camps. Spending a few thousand bucks on tutors to get a top entrance score can create merit aid that saves tens of thousands as well, better than paying more for college.
Looking at $1.2m USD in tuition for three kids over the next few years at rack-rates caused us to look very, very closely at how the systems work. The entire college scam is designed to deliver a lousy product for most kids while destroying the financial security of most families.
Trump Accounts are not the top priority or vehicle to make education affordable.
You invest for a newborn in a Trump account at $5000 a year for 17 years, your $85,000 investment is worth $168,000. The kid takes it out 1/4th per year for tuition, they pay capital gains on it each year, then they are double-punished because its treated as income on the FAFSA reducing their student aid because of their "income".
Alternatively, you invest $7500 a year in a ROTH IRA by hiring your children as wage-slaves to your personal side business starting on their 9th birthday. You've only assisted them in investing $67,500, their investments are worth $95,000, but they can withdraw the $67,500 tax-free and without FAFSA disclosure to pay for college. A better outcome via a better investment vehicle.
Higher education truly does suck.
www.gtlaw-insidebusinessimmigration.com
www.bbc.com
www.nbcnews.com
