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Trump Accounts: What Families Need to Know About the New Child Savings Vehicle Thumbnail

Trump Accounts: What Families Need to Know About the New Child Savings Vehicle

Insights
Information current as of December 2025. Rules and guidance may change as the IRS issues additional updates.

Families with young children have a brand-new planning tool on the horizon: Trump Accounts – tax-advantaged investment accounts for kids created as part of the One Big Beautiful Bill Act (OBBBA) and the Working Families Tax Cuts.

The IRS has now released initial guidance (Notice 2025-68) on how these accounts will work, and it’s generating lots of questions from parents and grandparents who want to give the next generation a head start.

Below is a high-level overview in plain English, plus some early planning thoughts. This is not a political endorsement—our focus is simply on what the rules say and how they may affect your long-term planning.

What Are Trump Accounts?

Trump Accounts are new, tax-advantaged investment accounts for children under age 18.

Key features at a glance:

  • Created under the One Big Beautiful Bill Act and implemented through the Working Families Tax Cuts.
  • Intended to encourage long-term investing and saving for children.
  • Funded by a combination of:
    • Federal government seed money (for certain birth years),
    • Charities and other organizations,
    • Employers, and
    • Individual contributors like parents and grandparents.

Accounts are expected to be available starting in 2026, with contribution rules tied to the year the child turns 18.

When Do Trump Accounts Start?

According to the U.S. Treasury and IRS:

  • Families will be able to establish Trump Accounts in early 2026.
  • Contributions can begin as early as July 4, 2026.

The IRS has created a central information hub at irs.gov/trumpaccounts, and the federal program website trumpaccounts.gov will be the online portal for opening and managing these accounts.

Who Qualifies for the $1,000 Federal Seed Money?

One of the most talked-about features is the $1,000 federal “pilot” contribution:

  • Children born between January 1, 2025, and December 31, 2028,
  • Who are U.S. citizens with a valid Social Security number,
  • May be eligible for a one-time $1,000 deposit from the federal government.

Important:

  • The money doesn’t show up automatically—you (or another authorized individual) must make an election using IRS Form 4547, “Trump Account Election(s)”, or via the trumpaccounts.gov site once it’s fully live.

How Are Trump Accounts Opened?

The IRS guidance explains that Trump Accounts can be established in two ways:

  1. IRS Form 4547
    • You (a parent, guardian, or other authorized individual) elect to open a Trump Account for a qualifying child.
  2. Online via trumpaccounts.gov
    • The Treasury will designate one or more financial institutions to serve as trustees for the initial accounts.
    • Later, you’ll be able to transfer the entire account to another financial institution through a trustee-to-trustee transfer if you prefer a different provider.

Partial transfers aren’t allowed at this stage—the whole account must move together.

How Contributions Work

During the “growth period” (the years before the child turns 18), several types of contributions are allowed.

1. Federal Government Contribution

  • The $1,000 federal seed contribution (for eligible birth years) is a one-time deposit and does not count toward the annual contribution limits.(Ed Slott and Company, LLC)

2. Qualified General Contributions

  • Government entities and charities can make contributions for a “qualified class” of beneficiaries (for example, all children in a particular program).
  • These also do not reduce the annual limit for family or employer contributions.

3. Employer Contributions

  • Employers may contribute on behalf of employees’ children.
  • There is a separate annual limit of $2,500 (indexed for inflation beginning in 2028) for employer contributions.

4. Individual Contributions (Parents, Grandparents, Others)

  • Family and other individuals can contribute after-tax dollars during the growth period.
  • Combined annual limit:
    • Up to $5,000 per year per child for individual + employer contributions (indexed starting in 2028).
    • Again, the $1,000 federal deposit and qualified general contributions do not count toward this $5,000 cap.(Ed Slott and Company, LLC)

No “Prior-Year” Contributions

Unlike IRAs, you cannot make contributions for a prior tax year. Contributions must be made in the current year only.

How and When Can Money Be Withdrawn?

The rules for withdrawals depend heavily on whether the child is still in the growth period or has turned 18.

During the Growth Period (Before Age 18)

Distributions are very restricted. The IRS only allows withdrawals for:

  • A trustee-to-trustee transfer to another Trump Account (for example, changing providers),
  • A rollover to a qualified ABLE account (for disabled beneficiaries),
  • Correction of excess contributions, or
  • Payouts upon the death of the beneficiary.

In other words: you should treat money contributed during this time as locked up until at least the year the child turns 18.

After the Growth Period (Age 18 and Beyond)

Once the child reaches the year in which they turn 18:

  • Distributions can be made at any time, for any purpose.
  • Amounts contributed by parents or other individuals are after-tax dollars, so those contributions come back tax-free.
  • However, earnings and certain other contributions (such as employer and government funds) are taxable when withdrawn.
  • Early withdrawal penalties and other detailed tax mechanics will generally follow traditional IRA rules once the growth period ends.

This makes the account somewhat of a hybrid: a child-focused “starter” account that gradually starts behaving more like an IRA in adulthood.

How Do Trump Accounts Interact With IRAs?

The IRS guidance makes a few important points about Trump Accounts and IRAs:

  • A child who has earned income can still contribute to a traditional or Roth IRA in addition to having a Trump Account. The two are separate.
  • After the growth period ends, Trump Accounts generally follow traditional IRA rules for distributions and taxation.
  • Roth conversions are allowed after the growth period, subject to the usual Roth conversion tax rules.
  • A Trump Account remains a Trump Account even after age 18 (unless it is converted to a Roth IRA).
  • It cannot receive SEP or SIMPLE IRA contributions.
  • For basis and the IRA “pro-rata rule,” Trump Accounts are never aggregated with a person’s other IRAs. They stand on their own for tax basis calculations.

For families who engage in more advanced strategies—like systematic Roth conversions, multi-account coordination, or business-owner retirement plans—these distinctions will matter.

How Do Trump Accounts Compare to 529s and Other Options?

Trump Accounts are one more tool in the toolbox, but they’re not automatically the best choice for every family. Early commentary from planners highlights both appealing features and tradeoffs:

Potential Advantages

  • Federal seed money for qualifying children can provide an immediate head start.
  • The ability for employers and philanthropies to contribute could be powerful, especially if your employer participates.
  • Long-term compounding from birth (or early childhood) to adulthood can be meaningful.

Potential Drawbacks

  • Money is largely locked up until the year the child turns 18—less flexible than a standard custodial account (UGMA/UTMA).
  • Earnings and many contributions are taxable upon withdrawal (more like a traditional IRA) rather than tax-free for qualified education expenses, as with 529 plans.
  • Investment menu and administrative features will likely be more limited and standardized, at least at the outset.

For many families, Trump Accounts will sit alongside:

  • 529 college savings plans,
  • Roth IRAs for working teenagers, and
  • Custodial accounts (UGMA/UTMA)

as part of a broader “child & young-adult planning” strategy.

What This Could Mean for Your Family (or Business)

Here are a few scenarios where we expect Trump Accounts to come up in planning conversations:

  • Parents of young children
     Coordinating Trump Account funding with 529 contributions, child tax credits, and your own retirement savings priorities.
  • Grandparents looking to create a legacy
     Integrating Trump Accounts into a broader gifting and estate-planning framework—alongside 529s, trusts, and charitable strategies.
  • Business owners & executives
     Considering whether employer contributions to employees’ Trump Accounts could be a competitive benefit, and how that fits with existing retirement and benefits plans.
  • Texas families
     There is already discussion in Texas of a state-level program modeled on Trump Accounts, which could add another layer of opportunity—and complexity—for local families if it moves forward.

Our Take: Proceed with Curiosity and Caution

Trump Accounts are brand new, and the rules are still evolving. The federal government, IRS, and Treasury are continuing to issue guidance and refine the administrative details.

We see them as a promising but specialized tool, not a replacement for tried-and-true strategies like:

  • Building a solid emergency fund,
  • Staying disciplined with your own retirement plan, and
  • Using 529s, Roth IRAs, and other vehicles where appropriate.

For many of our clients, especially those with high incomes and complex tax situations, the real value will come from coordinating Trump Accounts with the rest of the plan—not treating them as a one-off “bonus.”

Next Steps

If you have children or grandchildren born in or after 2025—or you’re a business owner thinking about employee benefits—this is a good time to start the conversation:

  • Do Trump Accounts make sense alongside your existing savings and gifting strategies?
  • How should you prioritize contributions between Trump Accounts, 529s, IRAs, and your own retirement accounts?
  • Are there opportunities to use Roth conversions or other tax strategies down the road?

We’re closely monitoring new IRS guidance and implementation details as they’re released. If you’d like to discuss how Trump Accounts may fit into your family’s plan, we’re here to help.

This material is for informational purposes only and is not tax or legal advice. The rules around Trump Accounts and related tax law may change. Please consult with your tax professional and financial advisor before making any decisions based on this information. Links below are more information on Trump Accounts.