TRUMP Accounts for Children: What Parents and Grandparents Need to Know
TRUMP Accounts for Children: What Parents and Grandparents Need to Know
On July 4th, 2025, a new type of account entered the financial planning landscape: the TRUMP Account, short for Tax-advantaged Retirement for United States Minors Program. For families thinking about long-term wealth building for a child or grandchild, this account introduces a savings structure worth understanding, particularly when paired with a Roth IRA conversion at age 18.
What Is a TRUMP Account?
A TRUMP Account is a tax-advantaged retirement savings account opened on behalf of a child under age 18. Contributions grow tax-deferred, and the account is designed to compound over decades before the child can access it. Unlike a 529 or custodial brokerage account, there is no earned income requirement. Newborns are eligible.
How to Open an Account
Accounts became available on July 4th, 2025, and can be opened at trumpaccounts.gov. Custodians available at launch include BNY (Bank of New York Mellon) and Robinhood.
There is a strict priority order for who can open the account on behalf of the child:
- 1st: Guardian
- 2nd: Parent
- 3rd: Adult sibling
- 4th: Grandparent
Contribution Rules: Who Can Give and How Much
Anyone can contribute on the child's behalf. Contribution types and limits break down as follows:
- Direct Contributions: Up to $5,000 per year (indexed to inflation starting 2027). Must be made by December 31st, not at tax time. These contributions add to basis in the account.
- Employer Contributions: Up to $2,500 per year per employee, counting toward the $5,000 limit. Not federally taxed. Available only through businesses with non-highly compensated employees.
- Qualified General Contributions (QGCs): From charities or government entities, with no annual limit. Pretax, no basis increase.
- $1,000 Pilot Program Contribution: Children born 2025 through 2028 are eligible for a $1,000 government seed contribution. This does not count toward the $5,000 annual limit, but must be elected proactively via Form 4547 or online.
How the Account Is Invested
During the Growth Period, while the child is under 18, investments are restricted to mutual funds or ETFs tracking broad market-cap indexes. Sector-specific funds are not permitted. The maximum expense ratio is 0.1%. The result is a simple, low-cost, diversified portfolio structured for long-term compounding.
The Roth IRA Conversion Opportunity at Age 18
Once the beneficiary reaches the year they turn 18, the TRUMP Account enters what the law calls the Post-Growth Period and can be rolled over into an IRA. With the right planning around basis and timing, a Roth IRA conversion becomes possible.
- An 18-year-old converting to a Roth has 40 or more years of tax-free compounding ahead.
- TRUMP Account basis is calculated separately from other traditional IRAs, which simplifies the pro-rata rule calculation.
- The standard approach is to max-fund the account every year and execute the Roth conversion as soon as Kiddie Tax rules no longer apply.
Critical planning notes: Kiddie Tax rules may apply to Roth conversions while the child is still a dependent. There is also a meaningful tax planning question around who will pay the conversion tax, parent or child. If the account grows as projected, the child could have $200,000 or more at age 18, which introduces its own set of conversations.
A Gifting Warning for Grandparents and Third Parties
Third-party direct contributions, such as a grandparent contributing directly to the TRUMP Account, count against the annual gift exclusion at present value, not future value. Because the account is locked until age 18, any direct third-party contribution likely requires filing a Form 709 gift tax return by April 15 of the following year.
A cleaner approach: rather than contributing directly to the account as a third party, gift cash to the parents or to a savings account first. The parent then contributes from their own funds, avoiding the gift tax filing requirement.
State Tax Treatment Varies
Not all states treat TRUMP Accounts the same way. Some states, including Massachusetts, will tax annual earnings in the account as ordinary income. New York, as of this writing, does not. Before opening an account, it is worth verifying how your state handles these earnings, as it can affect the net benefit of the strategy. State treatment is still evolving.
Two Sources of Free Money Worth Knowing
Children born 2025 through 2028 are eligible for a government seed contribution. Election must be made proactively via Form 4547 or online.
A $250 contribution is reportedly available through the Dell Foundation for eligible accounts.
Frequently Asked Questions
Who is eligible to open a TRUMP Account?
Any child under age 18 is eligible, including newborns. There is no earned income requirement. The account must be opened by a guardian, parent, adult sibling, or grandparent, in that priority order.
How much can be contributed to a TRUMP Account each year?
Up to $5,000 per year in direct contributions, indexed to inflation starting in 2027. Employer contributions count toward this limit. The $1,000 pilot program contribution for children born 2025 through 2028 does not count toward the $5,000 cap.
What happens to the account when the child turns 18?
The account enters the Post-Growth Period and becomes eligible for rollover into an IRA. With proper planning around Kiddie Tax rules and the timing of conversion, rolling it into a Roth IRA is often the most tax-efficient path.
Can a grandparent contribute directly to the account?
Technically yes, but direct third-party contributions at present value count against the annual gift exclusion and likely trigger a Form 709 filing. A simpler approach is to gift cash to the parents, who then contribute from their own funds.
Are TRUMP Account earnings taxed at the state level?
It depends on the state. Massachusetts, for example, taxes annual earnings in the account. New York currently does not. State treatment is still being established, so it is worth confirming your state's rules before opening an account.
Is a TRUMP Account better than a 529?
They serve different purposes. A 529 is designed for education expenses. A TRUMP Account is built for retirement savings, with no earned income requirement and the potential for a Roth IRA conversion at age 18. For families thinking about both goals, the two accounts can complement each other.
TRUMP Accounts introduce real planning opportunities, but also real complexity around gifting rules, Kiddie Tax, state tax treatment, and Roth conversion timing. If you have questions about whether this account makes sense for your family, we are happy to walk through the details.
Talk to an AdvisorThis article is for informational and educational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified financial advisor or tax professional before making any financial decisions. Rules and regulations around TRUMP Accounts are evolving; verify current guidelines at trumpaccounts.gov.
