If you have young children or grandchildren, you may have heard about a new federal savings account created specifically for kids. Trump Accounts were created by the One Big Beautiful Bill Act and launched on July 4, 2026. They give any child under 18 a tax-deferred investment account, and for children born between 2025 and 2028, that account can start with a $1,000 deposit from the federal government. Here’s what the accounts are, who qualifies, and what families should think through before opening one.
Here’s what the accounts are, who qualifies, and what families should think through before opening one.
What Is a Trump Account?
A Trump Account is a custodial investment account established under a new section of the tax code, Section 530A. It works something like an IRA for a minor: money grows tax-deferred, and unlike a typical IRA, the child does not need earned income for contributions to be made on their behalf.
Any child under 18 with a Social Security number valid for employment can have an account opened in their name by an authorized adult, generally a parent or legal guardian, though an adult sibling or grandparent may be authorized in some cases. The account belongs to the child, but a parent or guardian manages it until the child turns 18.
The $1,000 Federal Seed Deposit
The detail generating the most attention is a one-time $1,000 deposit from the U.S. Treasury. To qualify, a child must be a U.S. citizen, have a Social Security number, and be born between January 1, 2025, and December 31, 2028. The deposit is not automatic. An authorized adult must explicitly elect the account and the seed deposit for the child by filing IRS Form 4547. The election must be made no later than December 31 of the year the child turns 17. This is sometimes called the pilot program payment, and it’s separate from the regular annual contribution limit described below.
Children born before 2025 can still have a Trump Account opened for them and can receive ongoing contributions up to age 18, but they aren’t eligible for the $1,000 government deposit. Some private organizations have also pledged matching-style deposits for certain children, though the details and eligibility criteria for those programs vary by sponsor and aren’t part of the federal program itself.
How Much Can Go Into the Account Each Year
For 2026 and 2027, contributions from private sources are capped at $5,000 per child per year, combined across everyone who contributes: parents, grandparents, other relatives, friends, and the child’s employer if the child is old enough to work. This cap is indexed for inflation in $100 increments beginning in 2028.
A few details worth knowing:
- The limit is combined, not per person. If a parent contributes $4,000 and a grandparent adds $2,000 in the same year, the account has received $6,000 total and is over the limit.
- Employer contributions count toward the same cap. An employer can contribute up to $2,500 per year for an employee’s Trump Account or that of an employee’s dependent, and that amount is excluded from the employee’s current taxable income. Two details matter here. The $2,500 limit is per employee, not per child, so an employee with three children has one $2,500 cap to spread across those accounts, and the cap applies across all employers in a year. And because these dollars go in pre-tax, the contribution and its earnings are taxable when withdrawn. Employer contributions count toward the overall $5,000 limit, not on top of it.
- Contributions from charities and government entities don’t count toward the cap. The $1,000 federal seed deposit and certain other qualifying contributions are treated separately. These qualified general contributions have to be offered broadly, such as to every child in a birth year or a geographic area, rather than directed to one family’s account.
- There’s no income limit. Unlike a Roth IRA, there’s no phase-out based on how much a family earns. Any household can contribute up to the annual limit regardless of income.
- Contributions aren’t tax-deductible. Investment growth inside the account is tax-deferred until withdrawal, similar to a traditional IRA. Because family contributions are made with after-tax dollars, they create basis that comes back tax-free at withdrawal.
- The deadline is firm. Contributions for a given year must be made by December 31, with no grace period into the following spring.
Contributing more than the annual limit can trigger an excise tax on the excess amount if it isn’t corrected, similar to the penalty for over-contributing to an IRA.
How the Money Is Invested
Trump Accounts don’t offer the same range of investment choices as a typical brokerage account. Current rules limit investments to low-cost mutual funds or ETFs that track a broad U.S. stock index, such as the S&P 500, with annual fund fees and expenses capped at 0.1%. In practice, this means the account’s growth will move with the broader stock market rather than through actively managed or individually selected investments.
Because these accounts are equity-based, their value will fluctuate with market conditions, and there’s no guarantee of investment return. A longer time horizon, like the years between a child’s birth and their eighteenth birthday, generally allows more room to ride out short-term market swings. That said, past market performance is never a guarantee of future results.
What Happens When the Child Turns 18
Before a child turns 18, the account is in what the law calls a “growth period.” During this period, contributions are allowed but withdrawals generally are not.
Once the child turns 18, the account converts to a traditional IRA and standard IRA rules take over. That means the now-adult child becomes the only one who can contribute, and they’ll need taxable earned income to do so, just as with any other traditional IRA. Access at 18 is not the same as penalty-free access: withdrawals before age 59½ are generally subject to a 10% early withdrawal penalty on top of income tax, unless an exception applies. How much of a withdrawal is taxable depends on where the money came from. After-tax contributions from family come back tax-free, while the federal $1,000, employer and charitable contributions, and all investment earnings are taxed as ordinary income.
How to Open an Account
Families can open a Trump Account by filing IRS Form 4547 with a federal tax return, by mailing a paper copy of the form to the IRS, through the IRS’s online taxpayer portal (IRS Online Account), or by applying directly at trumpaccounts.gov. There’s no cost to open an account. Treasury establishes and administers the initial account; balances can later be rolled over to a private trustee, where account fees may apply.
A Wealth Transfer Tool for Grandparents
For grandparents who are already thinking about how to pass assets to the next generation, Trump Accounts offer a straightforward way to move money down a generation while a grandchild is still young. A $5,000 annual contribution falls well under the $19,000 annual gift tax exclusion for 2026. A gift tax return generally isn’t required, but if you are making other sizable gifts to the same grandchild in the same year, check with your tax advisor or estate attorney first.
For grandparents with larger estates, this can be one small piece of a broader strategy to move assets out of the estate over time. It won’t move the needle the way larger gifting strategies might, but it has two advantages: it’s simple, and the money grows tax-deferred for years before the grandchild ever touches it. If gifting to grandchildren is already part of your estate plan, funding a Trump Account is worth a conversation about how it fits alongside whatever else you’re doing, such as 529 contributions, custodial accounts, or trust-based gifting.
How Trump Accounts Compare to Other Savings Options
Families already have several ways to save for a child’s future, and Trump Accounts don’t replace those options so much as add another one to the mix. A 529 plan, for example, offers tax-free growth when funds are used for qualified education expenses and generally allows much higher contribution limits, but the money is intended for education. We compared the main education savings vehicles in Which College Savings Plan Is Right for You?, which is worth a look if college costs are the primary goal.
Trump Accounts, by contrast, aren’t restricted to education. Because the funds convert into a traditional IRA at 18, they function primarily as a long-term retirement savings vehicle rather than a dedicated college fund. Trump Accounts were part of a much larger package of tax changes; we walked through the broader picture in our overview of the One Big Beautiful Bill Act’s impact on taxes and personal finance.
Tradeoffs Worth Weighing
The advantages above come with real limitations, and they are worth understanding before opening an account:
- Growth is taxed as ordinary income. In a taxable custodial account, long-term gains and qualified dividends are generally taxed at lower capital gains rates, and assets receive a step-up in basis at death. Neither applies to a Trump Account.
- The money is locked up for a long time. Funds are inaccessible before 18 and then carry the 10% early withdrawal penalty until 59½. This is a retirement vehicle, not a college or first-home fund.
- Some analysts disagree about whether it beats the alternatives. Analyses from the Congressional Research Service and others have suggested that a taxable custodial account or 529 plan may produce a better after-tax result for many families, largely because of the ordinary income treatment on withdrawal from Trump accounts.
What This Means for Your Family
A few things worth considering if you’re deciding whether to open a Trump Account for a child or grandchild:
- If your child was born between January 1, 2025, and December 31, 2028, the $1,000 federal deposit requires an affirmative election on Form 4547. It is not paid automatically.
- If you’re weighing a Trump Account against a 529 plan, think about whether your priority is education funding specifically or broader, more flexible savings.
- If you’re a grandparent looking for simple ways to gift to grandchildren each year, a Trump Account contribution stays well under the annual gift tax exclusion. If you’re already making larger gifts to the same grandchild, check with your tax advisor or estate attorney first.
- If you’re a business owner or work for a company that offers this benefit, employer contributions of up to $2,500 per employee per year are worth understanding, since they’re excluded from current taxable income.
- Because this program was launched recently, some of the underlying rules are still being finalized through IRS guidance, so details may shift as regulations are completed.
This is a new program, and how it fits into your family’s broader financial plan will depend on your goals, your other savings vehicles, and your child’s age. If you’d like to talk through how this applies to your family, we’re happy to help.
The Bottom Line
Beneficiary designations are easy to overlook, but they’re a foundational part of any estate plan. They control where some of your largest assets go, they bypass your will, and once you’re gone, mistakes can’t be corrected.
The good news is that reviewing them is one of the simpler things you can do for your estate plan. If you’d like a second set of eyes on your estate plan, or want to make sure your designations align with the rest of your goals, reach out to our team and we’ll walk through them with you.
Sources: U.S. Department of the Treasury; Internal Revenue Service Notice 2025-68 and Revenue Procedure 2026-25; proposed regulations published in the Federal Register in March and August 2026; Investor.gov. Contribution limits and program details reflect rules in effect as of September 2026 and are subject to change as final regulations are issued. This article is for educational purposes only and is not tax, legal, or accounting advice. Tax rules vary by individual situation; consult your CPA or tax professional for advice specific to your circumstances.
This article is provided for educational and informational purposes only. The suitability of a Trump Account depends on an individual’s specific financial circumstances, objectives, risk tolerance, tax situation, and estate planning goals. References to legislative programs, tax benefits, or account features are based on information available at the time of publication and are subject to change through future legislation, regulation, agency guidance, or interpretation. Readers should consult a financial professional before making any financial decision.
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