Thinking about your child’s financial future can feel overwhelming. Between saving for college, managing everyday expenses, and planning for long-term goals, many parents and guardians are simply trying to find practical ways to put money aside for their kids.
A new option may soon become available called a Trump account. These accounts are designed to help children build savings over time and may offer some tax advantages.
If you have never heard of them before, you are not alone. Here is a simple explanation of what they are and how they may work.
What Is a Trump Account?
A Trump account, also called a Section 530A account, is a special savings and investment account for children under age 18.
One way to think about it is as a long-term investment account created specifically for kids. It works somewhat like a retirement account, but instead of being opened by an adult for themselves, it is opened to help a child build savings early in life.
The idea is simple: allow money to grow for many years before the child reaches adulthood.
One of the most interesting features is that the federal government may contribute money to help start the account.
Children born between 2025 and 2028 may qualify for a $1,000 government contribution if parents or guardians complete the required election.
How to Open a Trump Account
The IRS recently released proposed rules clarifying who may open a Trump account for a child.
In most cases, the account must be opened by an “authorized individual.” This usually means a parent or legal guardian. The person opening the account must confirm that no one with higher priority is available to do it. If they are not available, the rules allow other family members to step in.
The order of priority generally looks like this:
- Legal guardian
- Parent
- Adult sibling
- Grandparent
To open the account, the authorized individual will use Form 4547, which can be filed with a tax return or submitted separately. It is important to note that opening the account is not technically part of filing a tax return, even if the form is submitted at the same time. The IRS is also expected to allow online applications.
Based on current information:
- An authorized individual may use Form 4547 to open the account and request the $1,000 contribution.
- The form can be filed with a 2025 tax return or mailed to the IRS separately.
- An online option is also expected to be available through trumpaccounts.gov.
Right now, contributions cannot be made until July 4, 2026, and the IRS is expected to release more details as the program develops.
The IRS is still reviewing feedback on these rules, especially for situations involving foster children, orphans, or minors in state care. Additional guidance may be released as the program develops.
How Is This Different from a 529 Plan?
Many parents are already familiar with 529 college savings plans. These plans are designed specifically for education expenses, such as tuition, books, and housing. If the money is used for qualified education costs, the growth can often be tax-free.
Trump accounts work differently.
Instead of focusing on education, they are meant to support long-term savings and growth. Over time, the account may transition into something that works more like a retirement account.
In other words, the goal is not just paying for one expense but helping a child build financial resources for the future.
How Is This Different from Custodial Accounts?
Some families save money for children using custodial accounts. With those accounts, the money belongs to the child, and they gain full control once they reach adulthood, usually at age 18.
That can be helpful, but it also means the child can spend the money however they want once they take control.
Trump accounts take a different approach. They are designed as long-term investment accounts with structured rules meant to encourage steady growth over time.
Who Can Add Money to a Trump Account?
One interesting feature of these accounts is that many different people can contribute.
Possible contributors may include:
- Parents
- Guardians
- Grandparents
- Other family members
- Friends
- Employers
- Certain charitable organizations
In addition to the possible $1,000 government contribution, up to $5,000 per year may be added to the account.
Since multiple people may contribute, it will be important to track contributions carefully, so the yearly limit is not exceeded.
How Is Money Invested?
The investment choices for these accounts are expected to be fairly limited during the early years.
From the time the account is opened until the end of the year the child turns 18, investments are generally limited to:
- Broad U.S. stock market index funds
- Certain mutual funds, or
- ETFs.
There are also a few strict rules:
- The investments cannot use borrowing or leverage.
- They cannot focus on a single industry or sector.
- Fees must remain very low, generally capped at about 0.1% of assets.
These rules are meant to keep the account simple and focused on long-term growth.
What Happens When the Child Turns 18?
When the child reaches adulthood, the account may begin to operate more like a traditional retirement account. At that point, families may want to review several things, such as:
- How the money might be used.
- Whether the investment strategy should change.
- Whether other financial strategies might make sense.
There may also be a one-time opportunity at age 17 to move funds to an ABLE account, if the child qualifies.
Because the program is still developing, it will be important to stay informed as new guidance becomes available.
How Do Trump Accounts Fit into a Family Financial Plan?
For many families, a Trump account may simply become one part of a larger financial plan. Different savings tools serve different purposes. Parents often combine multiple strategies depending on their goals. Each tool has its own role, and the right mix often depends on your family’s situation.
Some families may still use options, such as:
- 529 college savings plans,
- Custodial accounts,
- Trusts, or
- Retirement savings plans.
A Program That Is Still Developing
Trump accounts are still new and evolving, and the IRS will likely release more details in the coming years. However, they may offer families another way to build long-term savings for children and possibly take advantage of a government contribution to help get started.
If you are considering opening an account for your child, it is important to understand the rules and how it fits with your other savings plans.
Contact Me
If you have questions about Trump accounts or saving for your child’s future, our team is here to help. We can walk you through your options and help you choose the strategy that makes the most sense for your family.
Contact the office today to speak with a member of our team.
