By Sonja Campbell

A new savings vehicle for minors, commonly referred to as a Trump Account, was created under IRC Sec. 530A as a long-term, IRA-like account for eligible children. These accounts are intended to support early wealth accumulation and generally operate under special rules while the child is under 18, then become subject to many traditional IRA rules after the account’s “growth period” ends. Although the opportunity may be attractive for parents, grandparents, and business owners, the rules are new and additional guidance is still expected.

Important timing note: Contributions are expected to begin on July 4, 2026. Proposed regulations have been issued, but certain guidance on contributions, investments, distributions, reporting, and IRA coordination has been reserved for future rulemaking.

What is a Trump Account?

Under IRC Sec. 530A, a Trump Account is generally treated similarly to a traditional IRA, but with special rules that apply while the beneficiary is a minor. During this early “growth period,” contributions, investments, and distributions are restricted.

Key features include:

The account is established for the benefit of an eligible child.
Contributions generally may be made even if the child has no earned income.
The account is designed for long-term accumulation; distributions are generally restricted before age 18.
Beginning January 1 of the year the beneficiary turns 18, the account generally becomes subject to traditional IRA rules under IRC Sec. 408.

Who is eligible?

An eligible beneficiary generally must:

Be under age 18 before the close of the calendar year in which the initial election is made;
Have a valid Social Security number issued before the election date; and
Have an election made to establish the account.

The election to open the account must generally be made on or before December 31 of the calendar year in which the child turns age 17. Proposed regulations generally permit only one active, funded Trump Account per beneficiary at a time.

How is the account opened?

An account may be opened by an authorized individual. If the account is being opened without also requesting the federal pilot contribution, the priority order generally is:

Legal guardian;
Parent;
Adult sibling; or
Grandparent.

The election is made by filing Form 4547 or by submitting an online Trump Account election through the IRS website. Form 4547 may be e-filed at the same time as the taxpayer’s return, but it is not part of the tax return itself. Treasury is expected to begin sending post-election account activation information in May 2026.

The $1,000 federal pilot contribution

A notable feature is the one-time $1,000 pilot program contribution under IRC Sec. 6434 for eligible children born after December 31, 2024, and before January 1, 2029.

For this pilot contribution:

The child generally must be a U.S. citizen with a Social Security number and be born in the 2025 to 2028 window.
The person making the election must generally anticipate that the child will be that person’s qualifying child for the tax year.
The $1,000 pilot contribution is not included in the beneficiary’s income and does not count toward the annual $5,000 contribution limit.

Contribution limits and sources

During the growth period, Trump Accounts may receive several types of contributions, including individual contributions, employer contributions, qualified general contributions, pilot program contributions, and certain rollovers.

Annual $5,000 limit

Contributions from individuals, such as parents, grandparents, relatives, the beneficiary, or others, are generally limited to $5,000 per year during the growth period. Under IRC Sec. 530A, the $5,000 limit applies to aggregate non-exempt contributions before the calendar year in which the beneficiary turns 18, with indexing for inflation after 2027.

Employer contributions

Employers may contribute up to $2,500 per employee per year, and employee pretax salary reduction contributions may also be permitted under employer programs. These employer and salary reduction amounts count toward the broader $5,000 annual cumulative limit.

For business owners, this may become a meaningful employee benefit planning opportunity, but plan design, payroll, nondiscrimination, reporting, and final guidance should be carefully monitored.

Tax treatment

Trump Accounts have several tax features that clients should understand:

No federal income tax deduction is allowed for contributions made before the year the beneficiary turns 18.
Earnings generally grow tax free until distributed.
Employer contributions under IRC Sec. 128 are excluded from income to the employee and the employee’s child.
Contributions from individuals are generally the only contribution type that creates basis in the account.
Pilot program contributions, qualified general contributions, and excluded employer contributions generally do not create basis.
After the growth period, the account generally follows traditional IRA rules, including rules for distributions, taxation, rollovers, Roth conversions, required minimum distributions, and reporting.

Trump Account contributions generally do not reduce the beneficiary’s ability to make traditional or Roth IRA contributions if the beneficiary otherwise satisfies the IRA contribution rules. However, Trump Accounts are not identical to traditional IRAs in all respects; for example, certain IRA aggregation rules apply separately to Trump Accounts and other IRAs.

Investment restrictions before age 18

During the growth period, investments are restricted. Generally, assets must be invested in certain mutual funds or exchange-traded funds that track a qualified index, do not use leverage, and have annual fees and expenses of 0.1% or less. A qualified index may include the S&P 500 or another qualifying index primarily composed of U.S. company equity investments, but not an industry- or sector-specific index.

Distribution restrictions before age 18

Distributions are generally prohibited before the first day of the calendar year in which the beneficiary turns 18. Limited exceptions may apply for items such as qualified rollovers, qualified ABLE rollovers, excess contribution corrections, and distributions upon the beneficiary’s death.

After the growth period, early distributions may be subject to traditional IRA income tax and penalty rules. Some exceptions may apply, such as for certain first-time home purchases, higher education expenses, or birth/adoption expenses.

Excess contribution cautions

Because multiple people may be able to contribute (parents, grandparents, other relatives, employers, and potentially others), families will need to coordinate carefully to avoid exceeding annual limits.

If excess contributions are timely distributed, the excess amount may avoid inclusion in gross income, but a 100% tax can apply to net income attributable to the excess. If excess contributions are not timely distributed, an annual 6% excise tax may apply. Under IRC Sec. 530A, excess contribution rules are specifically coordinated with IRC Sec. 4973(b) for years before the beneficiary turns 18.

Gift tax caution for parents and grandparents

One important open issue involves gift tax treatment. The available guidance notes a likely legislative oversight: contributions to Trump Accounts may not qualify as present-interest gifts and therefore may not be eligible for the annual gift tax exclusion absent a technical correction. As a result, clients may need to consider whether a Form 709 gift tax return is required and whether part of the lifetime gift and estate tax exemption is used.

This is especially important for grandparents or others considering larger annual contributions for multiple children.

How do Trump Accounts compare to 529 plans and UGMA/UTMA accounts?

Trump Accounts may be useful, but they are not a one-size-fits-all replacement for other savings tools.

Trump Account. Long-term, retirement-oriented savings for minors. There is a potential federal pilot contribution and a long compounding period, but investments and distributions are restricted before age 18.
529 plan. Education funding. Often more targeted and flexible for qualified education expenses, and may remain preferable when education funding is the primary goal.
UGMA/UTMA account. Broader nonretirement savings for a minor. May provide greater flexibility, but assets generally become available to the child at the applicable age of majority and may have different tax and financial aid consequences.

In many cases, a coordinated strategy using more than one vehicle may be appropriate.

Guidance is still evolving

The IRS issued initial guidance in Notice 2025-68 on December 2, 2025, and proposed regulations were published on March 9, 2026, with applicability generally intended for taxable years beginning on or after January 1, 2026. Final regulations are expected later, and important details remain subject to further guidance.

What clients should do now

Parents, grandparents, and business owners should consider the following steps:

Identify eligible children. Families with children born in 2025 through 2028 should pay particular attention to the potential $1,000 federal pilot contribution.
Watch for IRS activation and election procedures. Form 4547 and the IRS portal will be central to account elections.
Coordinate contributors. Families should track contributions from parents, grandparents, other individuals, and employers to avoid exceeding the $5,000 annual cap.
Evaluate employer programs. Business owners may want to monitor future guidance on employer contributions and salary reduction programs, including payroll and reporting requirements.
Consider gift tax reporting. Before making contributions, especially for multiple beneficiaries, discuss potential Form 709 filing obligations with your tax advisor.
Compare alternatives. Review whether a Trump Account, 529 plan, UGMA/UTMA account, Roth IRA, or a combination best fits your goals.
Stay flexible. Final regulations and additional IRS guidance may change implementation details.
Download the app at trumpaccounts.gov.