The One Big Beautiful Bill Act was signed into law on July 4, 2025, creating a new type of tax-advantaged account for children younger than 18, known as a “Trump Account.” The account is established under Section 530A of the Internal Revenue Code and functions as an individual retirement account (IRA). While an adult must manage the account, the child is the beneficiary and owner.
Trump Accounts became available for funding on July 4, 2026. They are tax-advantaged accounts, but unlike traditional and Roth IRAs, a child does not need earned income to establish an account or to receive contributions.
One of the program’s key features is the one-time $1,000 federal contribution for eligible children who are U.S. citizens born between January 1, 2025, and December 31, 2028. Children born before January 1, 2025, are still eligible for an account, but they will not receive the $1,000 contribution.
Eligible beneficiaries include children under age 18 who are U.S. citizens and have a valid Social Security number. As of Oct. 1, 2026, the U.S. Treasury Department automatically enrolled every eligible child in a Trump Account, extending accounts to more than 60 million children nationwide. Parents, legal guardians or other authorized individuals no longer need to establish an account on a child’s behalf, but they must still claim it before contributing or receiving the one-time $1,000 federal contribution. To claim an account, a parent or guardian downloads the Trump Accounts app, verifies their identity and relationship to the child, confirms the child’s information and accepts the account term.
During the account’s initial period, referred to as the growth period, the Trump Account is maintained for the benefit of the child and is subject to special contribution, investment and distribution rules. The growth period generally ends on December 31 of the
calendar year in which the child turns 17. Families should also understand that beginning January 1 of the calendar year in which the child turns 18, the account generally follows traditional IRA rules, meaning the child may withdraw funds, although distributions may be subject to income tax and an additional tax unless an exception applies.
Certain contributions are subject to a combined annual limit of $5,000 per child, with inflation adjustments beginning after 2027. However, contributions from certain governmental entities and charitable organizations are not subject to this limit. Likewise, the one-time $1,000 federal contribution does not count toward the annual contribution limit. Further, contributions made during the growth period are generally not tax-deductible for either the contributor or the beneficiary, but investment earnings grow on a tax-deferred basis.
Unlike traditional and Roth IRAs, a child doesn't need earned income to start saving — families can begin from birth.
Investment options are limited to eligible mutual funds and exchange-traded funds (ETFs) that track the S&P 500 or another qualifying equity index, with at least 90% of assets invested in U.S. companies. The funds must also satisfy certain expense limitations, including an expense ratio cap of 0.10%, or 10 basis points.
Beginning January 1 of the calendar year in which the child turns 18, they have the option to maintain the account as a traditional IRA, roll the funds into another eligible retirement account or consider a Roth conversion, subject to applicable tax rules. As with traditional IRA distribution rules, early distributions before age 59½ may be subject to ordinary income tax and a 10% additional tax, absent an exception.
Trump Accounts offer several benefits for long-term investing. The one-time $1,000 federal contribution for children born between 2025 and 2028 provides eligible children with an initial government-funded contribution. Since no earned income is required, families can begin saving for a child from birth rather than waiting until the child obtains employment. Earnings grow tax-deferred and contributions do not affect a family’s ability to contribute to other IRAs, 529 plans or custodial accounts.
Despite these advantages, families should consider the limitations of establishing Trump Accounts. Contributions during the growth period are not tax-deductible; investment options are narrowly restricted to qualifying U.S. equity index funds, which may limit diversification; and funds are generally restricted during the growth period. These limitations make Trump Accounts less flexible than 529 plans, especially for families seeking access to funds for education expenses. Lastly, and most importantly, legislative changes could alter the program rules, resulting in an element of uncertainty.
For families with children born between 2025 and 2028, electing the one-time $1,000 federal contribution may be an attractive opportunity. For other eligible children, the decision to make additional contributions should be evaluated alongside alternatives such as 529 plans, custodial Roth IRAs and UGMA/UTMA accounts, depending on the family’s financial and estate planning objectives.
As with any tax-planning decision, clients should consult with a tax professional to determine how a Trump Account may fit within their overall financial and estate planning strategy.
