The Trump Account: A Powerful New Way to Build Wealth for the Kids in Your Life

Think of a Trump Account as a starter investment account for a child that allows money to begin compounding long before that child enters the workforce. The account was created under Internal Revenue Code Section 530A and is structured as a special type of traditional IRA for eligible children.

For families thinking about long-term wealth planning, the significance is not simply the initial contribution. The real advantage is time. Money invested when a child is young potentially has decades to compound before retirement.

1. What Is a Trump Account?

A Trump Account is an individual retirement account established for the exclusive benefit of a child. An account generally may be established for a child who has not reached age 18 before the end of the calendar year in which the election is made and who has a valid Social Security number.

During the account's growth period, special contribution, investment and withdrawal restrictions apply. After the growth period ends, most of the normal rules governing traditional IRAs generally begin to apply.

2. Who Qualifies for the $1,000 Government Contribution?

One of the most publicized features of the program is the one-time $1,000 Treasury contribution available for certain children.

Generally, the child must be a U.S. citizen with a valid Social Security number and must have been born between January 1, 2025 and December 31, 2028.

3. How Much Can Be Contributed?

During the growth period, contributions from individuals and certain employer contributions are generally subject to a combined annual limit of $5,000 per child.

Parents are not the only people who can contribute. Depending on the circumstances, grandparents, relatives, friends and employers may also be able to fund the account.

Employer contributions receive special treatment. An employer may make qualifying contributions for an employee or an employee's dependent, subject to the applicable limits. Those employer contributions count toward the overall annual contribution limitation.

4. How Is the Money Invested?

During the child's growth period, the investment choices are more restricted than in a normal brokerage account. Eligible investments generally include qualifying mutual funds or exchange-traded funds that track indexes primarily composed of U.S. companies and satisfy the statutory requirements.

The intention is to encourage diversified, low-cost, long-term investment rather than frequent trading or speculation.

5. Can the Money Be Withdrawn Before Age 18?

Generally, distributions are heavily restricted during the growth period. The law is designed to keep the money invested for the child's future rather than functioning as an ordinary savings account.

Certain exceptions apply, including qualified rollovers, certain ABLE-account rollovers, distributions of excess contributions and distributions following the death of the beneficiary.

Beginning with the calendar year in which the beneficiary reaches age 18, most of the traditional IRA rules generally apply. Depending on how the money is eventually withdrawn, income tax and the additional tax on early distributions may apply unless an exception is available.

6. Trump Account vs. 529 Plan

The two accounts do not necessarily compete with one another. For some families the better strategy may be to use both, because they are designed to accomplish different financial objectives.

7. What About Grandparents, Aunts and Uncles?

This is where the account becomes particularly interesting for family wealth planning.

Instead of waiting until a child is older to make a significant financial gift, relatives may have an opportunity to begin building the child's investment base much earlier.

When the investment horizon is measured in decades, relatively modest contributions made early in life can potentially become meaningful assets later.

8. Gift Tax Considerations

Contributions by family members can also create gift-tax considerations. The IRS has provided a safe harbor for certain Trump Account contributions under which qualifying contributions may be treated as completed present-interest gifts eligible for the annual gift tax exclusion, provided the requirements of the safe harbor are satisfied.

Families making larger gifts should coordinate Trump Account contributions with their broader annual gifting, trust and estate planning strategy.

9. How Do You Establish an Account?

The election to establish an initial account is made using Form 4547, Trump Account Election(s). Eligible taxpayers may also submit the election electronically through their IRS Individual Online Account.

You generally need identifying information for both the person making the election and the child, including the child's Social Security number and date of birth.

The Bigger Planning Opportunity

The $1,000 contribution naturally receives attention, but that may not be the most important part of the program.

The larger opportunity is establishing an investment account at the beginning of a child's life and giving compounding decades to work. For families already using 529 plans, trusts, custodial accounts or other gifting strategies, the Trump Account creates another planning tool that should be considered as part of the overall picture.