Trump Accounts: A New Way to Start Investing for Your Child’s Future

Uptake has been significant. According to the Treasury Department, more than seven million accounts have been opened this year, taking in roughly $1.5 billion combined, a portion of which reflects the government's $1,000 contribution for children born between 2025 and 2028. As the accounts move from headline news to real household decisions, here's what we know, and what questions families should be asking.

Source: Laura Saunders, "The Pros and Cons of Putting Extra Dollars in a Trump Account," The Wall Street Journal, August 7, 2026 (wsj.com/personal-finance/taxes/the-pros-and-cons-of-putting-extra-dollars-in-a-trump-account-ab30c9bd).

What Is a Trump Account?

A Trump Account is a tax-deferred custodial investment account for minors. It shares some structure with a traditional IRA: earnings grow tax-deferred, and the account eventually converts into an IRA-like structure once the child turns 18. But it has its own distinct rules for eligibility, contributions, investments, and withdrawals.

Who Is Eligible?

A child qualifies if they:

• Have not yet turned 18 in the year the account is established
• Are a U.S. citizen
• Have a valid Social Security number

Only one Trump Account may be opened per child, and the account must be opened by a parent or legal guardian.

Children born between January 1, 2025 and December 31, 2028 are eligible for a one-time $1,000 federal seed contribution, deposited once the account is opened and the child qualifies. This seed money doesn't count against the annual contribution limit.

How Much Can Go In, and Who Can Contribute?

• Family and friends: The child, parents, or anyone else may contribute, subject to an annual cap.
• Annual limit: $5,000 per year per child, combining contributions from individuals and employers (expected to be indexed for inflation starting in 2027).
• Employers: May contribute up to $2,500 per employee, per year, deductible to the employer and excluded from the employee's taxable income.
• Governments and charities: States, the federal government, tribal governments, and 501(c)(3) organizations can make "qualified general contributions" to defined groups of children. These don't count toward the $5,000 cap.

Where Is the Money Invested?

For now, account funds are invested in the State Street SPDR S&P 500 ETF. Reporting indicates that additional low-fee index fund options, up to four more, are expected to become available over time. Accounts are currently administered by Bank of New York Mellon and Robinhood Markets, with transfers to other custodians expected to be permitted in the future.

What Happens When the Child Turns 18?

Here's a detail worth sitting with: account ownership transfers to the child on January 1 of the year they turn 18. From that point, the account is subject to traditional IRA rules, and the child, not the parent, controls it. If an 18-year-old decides to empty the account, that is allowed, though ordinary income tax and typically a 10% early withdrawal penalty would apply. It's worth factoring this "behavior risk" into how much a family chooses to contribute over the years.

Standard IRA-style exceptions to the 10% penalty (such as disability) are expected to apply, and account owners can also convert the balance into a Roth IRA, paying any tax due at conversion. For young people with little or no income, that tax can often be low. Converted contribution amounts (though not earnings) can generally be withdrawn tax and penalty free five years after conversion.

A Note on Tracking Basis

Contributions from governments, charities, and employers are generally pretax. Contributions from individuals, such as parents or grandparents, are typically after-tax. That distinction matters at withdrawal time: a portion of each payout tied to after-tax contributions isn't taxable and must be prorated accordingly. Custodians are expected to track this on IRS Form 5498-TA. Given how much this recordkeeping matters for avoiding double taxation down the road, families contributing meaningfully to these accounts should keep their own records as a backstop.

The Roth Conversion Strategy, and the Kiddie Tax Wrinkle

A popular strategy under discussion: contributing to a teenager's Trump Account with the intention of converting it to a Roth IRA in the year they turn 18, when income (and therefore tax on the conversion) is often low.

One wrinkle to watch for is the kiddie tax. If the taxable portion of a conversion exceeds a certain threshold (reportedly around $2,700, though this figure is subject to annual adjustment and should be verified for the applicable tax year), the excess may be taxed at the parents' rate rather than the child's. Ways to manage this include spreading conversions over multiple years, waiting until the child turns 24, or, where available, rolling pretax funds into an employer's traditional 401(k) and after-tax funds into a Roth IRA.

Given the complexity here, particularly the interplay between basis tracking, the kiddie tax, and conversion timing, this is a strategy worth designing with your tax advisor rather than executing on your own.

How Does It Compare to Other Child Savings Vehicles?

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The bottom line: a Trump Account is a meaningful complement to, not a replacement for, tools like 529 plans, custodial accounts, or trusts. As one CPA and father of two Trump Account beneficiaries put it in a recent interview, he chose to fund his state's 529 plan first for its tax credit, but still contributes to the Trump Accounts because "even if our contributions are small, the accounts can be converted to Roth IRAs later. And they're a great teaching tool to show the growth of money over time."

Source: Laura Saunders, "The Pros and Cons of Putting Extra Dollars in a Trump Account," The Wall Street Journal, August 7, 2026 (wsj.com/personal-finance/taxes/the-pros-and-cons-of-putting-extra-dollars-in-a-trump-account-ab30c9bd).

How to Open One

• File IRS Form 4547, either with your tax return or directly through the official Treasury site.
• Once processed, you'll be contacted with instructions to activate and fund the account.
• Watch for future guidance on transferring the account to a private brokerage firm and on additional investment options becoming available.

A note on this article: Trump Accounts are a new program, and details continue to develop. Figures in this article, including the kiddie tax threshold, Roth IRA for Kids contribution limit, and 529 state lifetime limits, are subject to annual adjustment or state-specific variation and should be confirmed against current IRS and state plan publications before being relied upon. As always, consult your tax or financial advisor before making decisions based on this information.

This article is for informational purposes only and does not constitute tax, legal, or investment advice.

Advisory services offered through NewEdge Advisors, LLC doing business as Streamline Wealth, as a registered investment adviser. Securities offered through NewEdge Securities, LLC, Member FINRA/SIPC. NewEdge Advisors, LLC and NewEdge Securities, LLC. are wholly owned subsidiaries of NewEdge Capital Group, LLC.