Client Alert: Trump Accounts: A New Savings Tool for Children
Date: December 22, 2025
The Major Draw: $1,000 Federal Seed Money
The most talked about benefit of Trump accounts is the $1,000 federal contribution available for each account established for a child with a valid Social Security number who is born between January 1, 2025, and December 31, 2028. Although any minor child who does not turn 18 in the year the account is established may open a Trump account, only children born within this four-year window qualify for the federal seed contribution. Once an eligible account is opened, the federal seed money is deposited automatically, giving children an immediate financial starting point for long-term investment. Over time, even without additional contributions, the funds may grow and provide support at important stages of life, such as higher education, a first home purchase, or retirement.
Assuming no future contributions, the U.S. Treasury estimates the $1,000 starting balance could grow anywhere from $3,000 to $13,800 over 18 years, depending on market performance. If the initial federal contribution remains invested from birth through retirement age, without additional contributions, the account could grow to more than $81,000. This projected growth underscores the significance of the federal seed contribution and provides a strong incentive to establish a Trump account.
What are Trump Accounts?
A Trump account is a tax-advantaged, long-term investment account established for children. Earnings grow tax-deferred until the beneficiary reaches the age of 18. As the program is designed to promote long-term investment, withdrawals are generally not permitted before age 18. While withdrawals are restricted, account funds must be invested in low-fee mutual funds or exchange-traded index funds that primarily hold U.S. stocks and do not use leverage. These requirements result in a relatively conservative investment structure.
Contributions
Beginning July 4, 2026, Trump accounts may accept contributions from a wide range of sources, including parents, relatives, employers, nonprofit organizations, philanthropists, and government entities. Annual contributions from personal sources are capped at $5,000, adjusted for inflation. Employers may contribute $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 as a benefit for eligible children.
Philanthropists Michael and Susan Dell—founders of Dell Technologies Inc.—pledged to contribute $6.25 billion to seed accounts for millions of children. Their gift is expected to provide $250 for 25 million children age 10 or younger living in zip codes with median incomes below $150,000. Although $250 may seem modest, the Dells hope their contribution will inspire broader support and help give millions of children a start on their journey towards a stronger financial future.
Withdrawals After Age 18
Once the beneficiary turns 18, withdrawals from a Trump account may begin, subject to certain restrictions. Although Trump accounts are legally distinct from 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, early penalty-free withdrawals may be made for certain qualified expenses. These include higher education expenses, first-time home purchases, and childbirth or adoption expenses. As a result, Trump accounts are structured primarily as a long-term savings vehicle, while permitting limited early access for significant life events.
Tax Treatment
The tax treatment of Trump accounts is still being finalized by the Internal Revenue Service. The IRS has issued only preliminary guidance and is currently accepting public comments through February 20, 2026. As a result, the details are subject to change.
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. In contrast, beneficiaries will owe ordinary income tax on investment gains and on tax-free contributions, such as those from nonprofit organizations or government entities. This treatment is consistent with traditional retirement savings accounts.
How Trump Accounts Fit into a Broader Planning Strategy
Trump accounts introduce a new savings option, but they should be evaluated alongside other planning tools with greater advantages. Particularly, 529 plans offer broader tax advantages, more diverse investment options, and far higher contribution limits than Trump accounts. For example, contributions to Trump accounts do not qualify for state income-tax deductions, whereas many states offer them for 529 contributions. In addition, Trump accounts are required to invest primarily in U.S. index funds, which may result in less diversification than the broader investment options available for 529 plans. Trump accounts are also subject to an annual contribution cap of $5,000, while 529 plans allow substantially higher contributions, subject to state-specific limits.
Meanwhile, supporters of Trump accounts hope they will broaden participation in financial markets to allow more families to share in the country’s economic growth. These accounts are intended to assist the youngest generation in building wealth into adulthood, specifically to support their higher education or first-time home purchases. Although Trump accounts have limitations in comparison to 529 plans, they still offer advantages in certain planning strategies.
Contributions to Trump accounts do not affect limits for 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. Therefore, guardians should consider using Trump accounts to supplement, rather than replace, existing tax-advantaged vehicles.
Above all, advisors widely agree that families who qualify for the $1,000 federal seed contribution should claim it. Even small amounts can grow meaningfully over 18 years due to compound interest. While some critics caution against contributing personal funds to a Trump account before funding other investment vehicles, these accounts may serve as a useful channel for receiving government or philanthropic giving, allowing outside funding to be invested directly in a child’s long-term financial future.
When and How to Enroll
A parent, guardian, or other responsible adult may make the election to establish a Trump account for a minor child. To do so, the adult must complete IRS Form 4547 (not released yet) or use the online enrollment portal at TrumpAccounts.gov. Elections may be submitted any time after the IRS releases the form. Alternatively, the online portal is expected to become available in mid-2026. Practically, people should submit their election to open an account when filing their 2025 income-tax returns.
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.