Trump Accounts: A Closer Look

By Timothy Hamilton, CFP®, CPWA®

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced a new type of savings vehicle for American children: the Trump Account. While our earlier article on the OBBBA touched on Trump Accounts as part of a broader overview, the program warrants a deeper look. Accounts officially become available on July 4, 2026, and families with eligible children should understand the rules before that date.

Our aim here is to explain how Trump Accounts work: eligibility, contributions, investment rules, distributions, and the tax landscape, and to highlight planning considerations relevant to your household. As always, we welcome your questions and are glad to discuss how this new vehicle fits into your overall financial plan.

Please note: Final regulations are still being finalized as of June 2026. The IRS issued initial guidance in Notice 2025-68 (December 2025), and proposed regulations were published in the Federal Register in March 2026. Additional rules are forthcoming. This article reflects current guidance, which may evolve.

What Is a Trump Account

A Trump Account (established under IRC Section 530A) is a new type of individual retirement account designed specifically for children under the age of 18. Think of it as an IRA with training wheels: during the child’s minor years, special rules govern how the account is invested, contributed to, and accessed. Once the beneficiary turns 18, those training wheels come off, and the account transitions to a standard traditional IRA.

The government seeded the program with a one-time $1,000 federal contribution for children born in the eligible window, offering every qualifying American child a financial head start.

Eligibility

Any U.S. citizen under the age of 18 with a valid Social Security number is eligible to have a Trump Account opened on their behalf. The $1,000 federal seed contribution is available for children born between January 1, 2025, and December 31, 2028.

An authorized individual must open the account; the priority order is strictly as follows:

• Legal guardian
• Parent
• Adult sibling
• Grandparent

*This strict order means a grandparent generally cannot open an account if the grandchild’s parents are available and able to do so.

To claim the $1,000 pilot program contribution, the authorized individual must file IRS Form 4547. This form can be filed electronically with the 2025 tax return, mailed separately, or submitted through the forthcoming online portal at trumpaccounts.gov (expected mid-2026). The $1,000 deposit will not be made before July 4, 2026.

Contributions:

Trump Accounts accept contributions from multiple sources:

The $5,000 annual contribution limit will be indexed for inflation beginning in 2027. Unlike traditional IRAs, contributions are not deductible by the contributor. However, individual contributions do create a basis in the account, meaning they will not be taxed again upon withdrawal. Government, employer, and tax-exempt organization contributions do not create basis and will be taxable upon distribution.

Gift Tax Note: Contributions to a Trump Account currently do not qualify for the annual gift tax exclusion ($19,000 in 2026), because the child does not have immediate access to the funds. Grandparents or other donors making significant contributions may need to file IRS Form 709. This is an area where further legislative guidance may provide relief, but for now families should plan accordingly.

Investments During the growth Period

To protect the long-term character of the account, Trump Accounts are subject to strict investment guardrails during the growth period (from account establishment through December 31 of the year before the child turns 18):

• It is required that the account is invested in low-cost mutual funds or ETFs that track a broad U.S. stock market index (such as the S&P 500 Index).
• Annual expense ratios are capped at 0.10% (10 basis points).
• Leveraged or high-risk derivative investments are prohibited.

Once the beneficiary turns 18, the investment restrictions no longer apply, and the account can be managed like any other traditional IRA.

Distributions

Before 18:

No distributions are permitted during the growth period, with very limited exceptions:

• A qualified rollover to a different Trump Account custodian (trustee-to-trustee transfer)
• A qualified rollover to an ABLE account (for children with disabilities) during the year the child turns 17
• Return of excess contributions
• Distribution upon the death of the beneficiary

Hardship distributions are not permitted.

After 18:

Beginning January 1 of the year in which the beneficiary turns 18, the Trump Account transitions to a traditional IRA and standard IRA distribution rules apply:

• Taxation: Withdrawals are taxed at ordinary income rates to the extent they exceed the beneficiary’s basis (i.e., the after-tax individual contributions made on their behalf).
• Penalty-Free Qualified Withdrawals: Withdrawals for higher education expenses, first-home purchases (up to $10,000), medical expenses, disability, terminal illness, and certain other IRA exceptions are not subject to the 10% early withdrawal penalty.
• Non-Qualified Early Withdrawals: Withdrawals that do not qualify for an exception before age 59½ are subject to income tax plus a 10% penalty.
• Required Minimum Distributions (RMDs): Standard RMD rules apply once the account converts to a traditional IRA.

Planning Considerations

Trump Accounts present interesting opportunities and some nuances that are worth thinking through with your FLP  Planner.

For families wishing to jumpstart savings for children born during this period, the $1,000 initial deposit is a catalyst. The following illustrations represent the 18-year growth of the $1,000 initial deposit, with and without additional contributions, assuming an average annual return of 8%.  The account would grow to approximately $3,996 by the time a child born in 2025 turns 18 and with consistent maximum family contributions of $5,000 per year, the account could grow well above the initial contribution by age 18, depending on investment performance. The combination of time and tax-deferred growth is compelling.