The Financial Compass

What is a Trump Account?

Per the trumpaccounts.gov website, these accounts are intended to help children in the US jumpstart the American Dream. The goal is to help, “build long-term financial security for millions of children by creating tax-advantaged investment accounts for US citizens under the age of 18.”

Created by the One Big Beautiful Bill Act (OBBBA) of 2025, Trump accounts act as a custodial IRA owned legally by the child, but administered by an adult. Here’s what you need to know:

• Eligibility—any child with a valid SSN who is a U.S. citizen and has not yet reached age 18 can open a trump account
• Contribution Limits:
  • Contributions—made with after-tax dollars, meaning your tax professional needs to keep track of the basis (post-tax vs. pre-tax)
  • Annual Limit—up to $5,000/year total from family, friends, or employer
  • Employer Contributions—employers can contribute up to $2,500/year, but it counts towards the $5,000/year annual limit
  • Governments & Charities—can contribute without counting against the $5,000/year annual limit, the government seed funding for example
• $1,000 Government Seed Funding—only available to US Citizens born between January 1, 2025, and December 31, 2028
• Accessibility—accounts generally cannot be withdrawn from before January 1^st of the calendar year in which the child turns 18
• Tax Benefits—there is no tax credit or deduction received for making contributions
• Taxation—this account type is tax-deferred until the child reaches age 18, at which point they become a Traditional IRA, where growth remains tax-deferred
  • Meaning any taxation on interest, dividends, or capital gains is deferred into the future (until distributions or conversions are made)
  • It also means you cannot access the money until age 59 ½ without incurring a 10% penalty (in most cases)
• Gift Tax Status—as it stands right now, Trump Accounts lack the specific language qualifying them for the annual gift tax exclusion, like with 529 Plans
  • That means contributions to these plans would require the filing of a Gift Tax Return or Form 709 because they are treated as taxable gifts of future interest
• Investments & Structure—must be invested in certain mutual funds or ETFs that track the S&P 500 or another index of primarily American equities, per the IRS
  • Invested in a Treasury-approved default investment option (not self-directed)

Our Thoughts on Trump Accounts

In short, Trump Accounts can help teach great financial habits and build investment discipline.
However, outside of capturing the $1,000 seed funding if you have children born between 2025-2028, or matching contributions from your employer, we believe other investment vehicles are better suited to help you and your children achieve your financial goals.

Other Investment Vehicles for Children

• UTMA/UGMA—Uniform Gift/Transfer to Minors Act
  • Taxable accounts for minors with no investment minimums and wider range investment options & custodian choices
  • Interest, dividends, and capital gains could be taxed in the current tax year based on the kiddie tax rule
• Minor Roth IRAs
  • Roth IRAs, for minors with earned income, that allow them to start investing for their retirement early
  • Subject to the same contribution limits and distribution rules as all Roth IRAs
• 529 Plans
  • Investment accounts designed to help pay for qualified educational expenses in K-12 and college in a tax-free fashion
  • Contributions in many states also provide tax credits or deductions as well

Disclaimer: Understand each account’s impact on FAFSA for those trying to qualify***

Whether your goal is to help your child pay for their education, be prepared for life after high school or college, or get a jumpstart on retirement savings, these account types are likely better options.
The gift tax return filing requirement of Trump Accounts adds unnecessary cost and complexity to your tax situation for no immediate tax or other benefit. Now, if your work is offering to match contributions, then it may be worth considering.

Final Verdict on Trump Accounts & Investment Vehicles For Children

1. Open a Trump account to receive the $1,000 seed funding if you have children born between the years 2025-2028 & inquire about employer contributions at work
2. Consider a 529 Plan if you want a tax-advantaged way to help pay for your kids’ K-12 or college expenses with the potential for a tax benefit tied to contributions
3. Consider a UTMA/UGMA if you want to help your child begin saving and investing for a car, home, or other financial goals in an account that they can access at any age
4. Consider a Minor Roth IRA if your child has earned income and you want them to begin investing for retirement or simply build strong financial habits
5. Consider converting the Trump Account to a Roth IRA when your child turns age 18 before their earned income or other income begins to rise

DISCLAIMER 

The information provided does not constitute legal, tax, or financial advice. Before making any investment or financial decisions, you should consult with a qualified attorney, tax advisor, or financial professional who can consider your individual circumstances.

SOURCES 

+ U.S. Department of the Treasury & IRS. (2025, Dec.). Treasury, IRS issue guidance on Trump Accounts established under the Working Families Tax Cuts; notice announces upcoming regulations. https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-trump-accounts-established-under-the-working-families-tax-cuts-notice-announces-upcoming-regulations

+ Trump Accounts Official Website. (n.d.). https://trumpaccounts.gov/

+ AICPA & CIMA. (2026, March).Trump Accounts: What CPAs need to know. https://www.aicpa-cima.com/resources/article/trump-accounts-what-cpas-need-to-know