Families now have a new savings account to consider for their children thanks to the One Big Beautiful Bill Act (OBBBA). Described as an individual retirement account for minors, Trump Accounts officially launch on July 5, 2026. Here are the details of the new IRA-style accounts, the rules families should know about, and when and why it may be worth funding for wealthy families.
What is a Trump Account?
Created under the Working Families Tax Cuts of the OBBBA, Trump Accounts are a new account type for eligible children under 18. These tax-advantaged investment accounts are for U.S. citizens, with the account owned by the child but administered by an adult. A key advantage is a one-time $1,000 head start contribution from the government available for children born between Jan. 1, 2025, and Dec. 31, 2028.
How to open a Trump Account
Parents or guardians must open a Trump Account on behalf of each eligible child. Be sure to check that the child is eligible — a U.S. citizen with a Social Security number who has not turned 18 by Dec. 31 of the year the election is made — and whether they fall into the 2025-2028 window for the $1,000 seed contribution.
To complete the process, you need to make an election when you file your taxes using Form 4547. After that, a financial institution will receive any contributed funds and activate your child’s account.
Contributions
After July 4, 2026, you can start contributing up to $5,000 a year in aggregate. According to TrumpAccounts.gov, the funds are automatically invested in U.S. companies via certain mutual funds or ETFs tracking the S&P 500 or another index of primarily American companies, and you’ll be able to see which stocks your child owns and how they’re performing.
Employers can contribute to the Trump Account of an employee’s dependent up to $2,500 per year, which counts against the $5,000 annual limit. The $2,500 is also per employee, not per dependent, so an employee with two dependents could receive contributions for them of up to $1,250 each. This employer contribution is not taxable for the employee, but it is deductible for the company. Beware of overfunding, though, and be mindful of the $5,000 aggregate cap and employer amounts.
To contribute, the business needs to have an accountable plan, and it must be in writing by the employer. Trump Accounts aren’t allowed to favor highly paid employees, but beyond that, they can be set up to include any group of employees, as long as it’s spelled out in the official plan document.
Friends, family members, certain government entities, and charities can also choose to contribute to Trump Accounts.
It’s important to know that if you contribute to an account, you will be required to file Form 709, United States (and Generation-Skipping Transfer) Gift Tax Return. This is because the law that created the Trump Accounts didn’t include language that labels contributions as gifts of “present interest.” Your contribution doesn’t qualify for the annual gift exclusion, so you’ll need to file a federal gift tax return for the amount you contributed. It’s likely that this language will be changed, but for now, Form 709 is required.
Trump Account tax benefit and withdrawal rules
Contributions made to a Trump Account are tax-deferred, meaning taxes on the investment gains are postponed until a distribution is taken. However, it is important to note that tax-deferred does not mean tax-free. When distributions are made from the account, they may result in taxable income for the beneficiary.
Before making contributions, families should consult with their advisor regarding gift-tax reporting and talk about how Trump Account contributions fit within existing trusts and estate plans to ensure alignment with their overall financial strategy.
Because these accounts are intended for long-term savings, funds held in a Trump Account can’t be withdrawn before Jan. 1 of the year the beneficiary turns 18. Once the child hits this age threshold, the account is generally treated as a traditional IRA, and the same rules and regulations regarding distributions typically apply.
That means withdrawals taken before age 59½ will face a 10% penalty unless the funds are used for certain eligible expenses, including higher education, first-time home purchases (up to $10,000), birth or adoption expenses (up to $5,000), or qualifying disability or terminal illness costs. It also means the required minimum distribution (RMD) rules will apply.
Why high-income families should consider Trump Accounts
Should a high-income family use this? The answer is yes, to take advantage of the $1,000 seed contribution. Wealthy families still qualify for the one-time contribution, as long as the child is born within the qualifying window. Plus, with no income restrictions, any family can start a Trump Account and contribute funds to it each year.
It makes sense to start a Trump Account for your newborn if you want an IRA-like structure for long-horizon investing and are comfortable with not withdrawing the funds until after your child turns 18.
Trump Accounts can be used alongside 529 plans, UGMA/UTMA, and custodial Roth IRAs to set up your child for a healthy start to adulthood. Since many families already max out 529 plans and prefer taxable brokerage accounts for flexibility, Trump Accounts can be an additional option for savings and can be part of your employer benefits.
If you’ve already used the more common financial savings vehicles, consider opening Trump Accounts to get the government contribution, then decide if further funding aligns with your tax and estate goals.
Reach out to our team for help with your child savings and gifting strategies.