Trump Accounts: Should You Evaluate this New Savings Tool for Children?

Date: December 24, 2025

In 2026, families will have access to an additional savings opportunity to support their children’s financial futures.  Trump Accounts are a new tax-deferred investment account, created by the One Big Beautiful Bill Act in July 2025, parents or legal guardians can open that on behalf of minor children.

Why would a parent or guardian want to open a Trump Account? $1,000 Federal Seed Money 

Any minor child under the age of 18 may open a Trump account.  But, one of the biggest benefits of the Trump account is the $1,000 federal contribution for any child with a valid Social Security number who is born between January 1, 2025, and December 31, 2028.  Only children born in this four-year window qualify for this extra $1,000, which is deposited automatically once the eligible account is opened.  Parents and guardians will eventually be able to make additional contributions to the account, though it’s not required.

The U.S. Treasury estimates that the $1,000 starting balance could grow anywhere from $3,000 to $13,800 over 18 years, depending on market performance.  If that seed money is left, invested until retirement without additional contributions, the account could grow to more than $81,000.  This is just one strong incentive to establish one of these accounts.

What exactly is a Trump Account?

It is a tax-advantaged, long-term investment account available only to children.  The program is designed to promote long-term investment, and earnings will grow tax-deferred until the beneficiary reaches the age of 18.  Withdrawals are also restricted until this age.  Account funds will be invested only in low-fee mutual funds or exchange-traded index funds that primarily hold U.S. stocks, resulting in a relatively conservative investment strategy.

Contributions

Beginning July 4, 2026, Trump accounts may accept contributions from other sources, including parents, grandparents, possibly other government organizations and more.  At this point, annual contributions from personal sources are capped at $5,000, adjusted for inflation. Employers may offer to contribute up to $2,500 annually without increasing an employee’s taxable income. Contributions from public sources, such as government entities, nonprofit organizations, and philanthropic donors, are not subject to the annual contribution limit. For example, the $1,000 federal seed money will not displace contributions from other sources and will serve solely to benefit eligible children.

Withdrawals After Age 18

Once the beneficiary turns 18, withdrawals from a Trump account may begin, subject to certain restrictions. Although Trump accounts are not traditional IRAs, their distributions are treated similarly.  Withdrawals made before the retirement age of 59½ are generally subject to a 10% penalty, in addition to any applicable income taxes.

However, certain expenses qualify for early, penalty-free withdrawal.  Expenses such as higher education, first-time home purchases, and childbirth or adoption costs can be withdrawn without penalty.  You can think of these accounts as long-term investments that provide some flexibility for larger life events.

Tax Treatment

The tax treatment of Trump accounts is still subject to change but is generally consistent with the taxing of traditional retirement savings accounts.  The IRS has issued only preliminary guidance and is currently accepting public comments through February 20, 2026.

Currently, under the law, investment earnings within an account grow tax-deferred and are taxable only upon withdrawal. Post-tax contributions—like those made by family members—are not taxed when withdrawn.  Tax-free contributions and investment gains will be taxed, and beneficiaries will owe ordinary income tax on them.

Make Sure You Evaluate a Broader Strategy

While Trump accounts introduce a new savings option, intending to assist our youngest generation in building wealth into adulthood, you need to make sure that you’re evaluating all your planning tools to get the best advantage from your options.  Other investment strategies may offer better tax advantages and a wider range of investment options.  529 plans, for example, have higher contribution limits than Trump accounts, broader investment options, and qualify for state income-tax deductions.
One consideration for a Trump account is that contributions to these accounts do not affect limits on other savings or retirement accounts. For example, a child with earned income could still maximize annual IRA contributions while also accepting funding through their Trump account. Using these accounts as a channel for receiving government or philanthropic giving, could allow this outside funding to be invested directly in a child’s long-term financial future.

Remember, small amounts can grow meaningfully over 18 years due to compound interest, which is why advisors widely agree that families who qualify for the $1,000 federal seed contribution should claim it even if you choose to keep a majority or all of your other funds in other investments.

When and How to Enroll

To enroll, a parent or guardian may elect to establish an account for a minor child.  This adult must complete IRS Form 4547 (which has not yet been released) or use the online enrollment tools at www.trumpaccounts.gov.  The form release date is TBD while online enrollment is expected to become available in mid-2026.  We are also expecting an option to submit the election when filing your 2025 tax return, which will be due in April of 2026.

In May 2026, the U.S. Treasury Department will send information to everyone who made the election, allowing them to activate the account and complete the opening process.

The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.