Trump Accounts Explained

How the New Child Investment Program Works

On July 4, 2026, the "Trump Accounts" program launches, introducing a new, government-backed savings vehicle designed to help children begin investing early in life. Structured as a "starter IRA," these accounts are built for long-term, tax-advantaged growth, giving families another way to start building wealth for the next generation. 

The timing is also notable, as the launch coincides with the 250th anniversary of U.S. independence, reinforcing the broader theme of financial independence and long-term opportunity. 

At the center of the program is a one-time $1,000 government seed contribution for eligible children born between January 1, 2025 and December 31, 2028. While accounts can be opened for any child under 18, only those within this window qualify for the initial government deposit.

Contributions and Investment Rules

Trump Accounts are designed to be simple and disciplined, with clear limits on contributions and a defined investment framework. Families, friends, and even employers can contribute, but there are overall limitations as to how much.

• $5,000 aggregate annual contribution limit per child from parents, family, friends, and employers
• Employers may contribute up to $2,500 per employee as a tax-free benefit
• Only one account per child is permitted
• Investments are limited to low-cost mutual funds and ETFs tracking U.S. markets (e.g., S&P 500)

Trump Account Structure

From a structural standpoint, Trump Accounts operate similarly to other custodial investment accounts, with a few key distinctions. 

The account is owned by the child, while a parent or guardian manages it until the child reaches adulthood. During this time, the account is in what's often referred to as a "growth period," where funds are intended to remain invested and untouched. 

• A Trump Account may be opened any time before the child turns 18
• No withdrawals are allowed before the child reaches 18
• The child is the legal account owner, with a parent or guardian serving as a custodian to manage the account
• At age 18, the account transitions to follow traditional IRA tax rules

Role in Financial Planning

Trump Accounts can be a valuable addition to a broader financial plan, but they are generally best viewed as a secondary tool rather than a primary savings strategy. 

For most families, priorities like retirement savings and education funding should still come first. That said, these accounts introduce a unique opportunity to start investing earlier than ever, which can be meaningful over a long time horizon. 

They also offer some flexibility once the child reaches adulthood, with features that mirror traditional IRA benefits. When used thoughtfully, these accounts can complement existing strategies and help build long-term financial habits early.

Key Considerations for Planning:

• Typically, secondary to core priorities like retirement savings and education funding
• Allow the same qualified withdrawals as IRAs (e.g., education, first home purchase up to $10K) at age 18
• Can be converted to a Roth account when the child is in a lower tax bracket
• Children with earned income may still contribute to other IRA accounts

How to Set Up an Account

Setting up a Trump Account is designed to be relatively straightforward and ties directly into the tax filing process. To open an account and elect the government contribution (if eligible), an authorized individual (i.e., a parent or guardian) must complete the required IRS form or use the online portal.

Steps to Establish an Account:

• File Form 4547 along with your individual tax return (Form 1040). This can be e-filed along with your tax return. Clients working with a tax preparer should request inclusion of Form 4547
• The process can be completed through trumpaccounts.gov
• Information submitted will be used to establish the account, followed by additional setup steps

Filing Form 4547 is essential, as it both initiates the account and secures eligibility for the $1,000 government deposit, if applicable.

Key Considerations

As with any new program, the overall concept is relatively simple, but the details matter. Trump Accounts include a number of nuances, particularly around how contributions are treated and reported, that can affect planning decisions over time. Before moving forward, it is important to understand how current rules apply and where future guidance may introduce changes.

Account Set-Up and Flexibility:

• Custodians for initial funding are limited to Bank of New York (BNY) and Robinhood
• Accounts can be transferred to other major financial institutions after establishment of the account and receipt of the $1,000 government deposit

Tax Treatment:

• Contributions from family and friends are made with after-tax dollars, meaning the contributed amount (basis) is not taxed again upon withdrawal
• Government and employer contributions are taxable upon withdrawal
• Distributions are taken on a pro-rata basis, blending taxable and non-taxable amounts
• Tracking and maintaining accurate records of contribution basis is important

Gift and Estate Considerations:

• Under current rules, contributions do not qualify for the annual gift tax exclusion (e.g., $19,000 per individual in 2026)
• As a result, contributors are generally required to file Form 709
• Contributions reduce the federal lifetime gift and estate tax exemption
• These contributions are currently treated as future-interest gifts, which is why they do not qualify for the annual exclusion

That said, this area remains in flux. There is ongoing discussion around whether contributions should instead be treated as present-interest gifts, which would make them eligible for the annual exclusion. Future guidance may ultimately change this treatment. 

Additional Considerations:

• The kiddie tax may apply to certain withdrawals for younger account holders
• As with any new legislation, rules and interpretations continue to evolve, and updates are expected over time

Conclusion

When used strategically, Trump Accounts can serve as a disciplined way to introduce long-term investing early and build meaningful wealth over time.

Contact BakerAvenue to evaluate how a Trump Account fits within your broader financial plan, coordinate contribution strategies, and navigate the evolving tax and gifting rules with confidence.