A new tax-deferred account for children may provide an early start on long-term investing, but families should understand the rules, limitations, and available alternatives.

Created as part of federal tax legislation enacted in July 2026, Trump Accounts are a new savings vehicle designed to give children an early start on long-term investing. Beginning in 2026, families can use these tax-deferred accounts to invest on behalf of eligible children, with special rules governing contributions, investments, and withdrawals.

A Trump Account is a tax-deferred investment account that an authorized adult can open for a child under age 18. The account allows up to $5,000 in combined annual contributions, invests in low-cost funds that track the S&P 500 or other qualifying U.S. indexes, and converts to traditional IRA rules beginning the calendar year the child turns 18.

The premise is straightforward: begin investing early, so the money has more time to potentially grow. For families, a Trump Account may become another tool for long-term savings, but it is not necessarily the right tool for every objective. It should be considered alongside 529 plans, custodial accounts, Roth IRAs for children with earned income, and parent-owned brokerage accounts. This article walks through eligibility, contribution limits, investment restrictions, withdrawal rules, and the steps needed to open an account.

Who Is Eligible for a Trump Account?

A child qualifies for a Trump Account if they are age 17 or younger on December 31 of the year the election is made. They must also have a valid Social Security number that was issued before the election. The “election” is simply the formal request, made on IRS Form 4547, to establish the account.

There is no income limit for eligibility, and the child does not need to have earned income. This is one of the meaningful differences between a Trump Account and a custodial Roth IRA.

Who Qualifies for the $1,000 Federal Contribution to the Trump Account?

A separate pilot program provides a one-time $1,000 contribution from the U.S. Treasury for certain eligible children. To qualify, the child generally must be a U.S. citizen, have a valid Social Security number, and be born between January 1, 2025, and December 31, 2028. It is important to note that an authorized individual must also complete the required election for the child to receive the contribution.

The $1,000 contribution is deposited directly into the child’s Trump Account rather than paid to the parent or guardian.

How Much Can You Contribute to a Trump Account?

Contributions from all sources are generally capped at $5,000 per child per year during the growth period. Certain pilot-program, government, charitable, and rollover contributions may not count toward that limit. The $5,000 contribution limit is scheduled to be adjusted for inflation after 2027.

Contributions can be made to a child’s Trump Account from parents, relatives, and employers. Employer contributions are generally limited to $2,500 per employee per year and count toward the child’s overall $5,000 annual contribution limit. Families should therefore coordinate contributions from different sources so that the account does not end up over-funded.

Contributions made during the growth period are not deductible under the usual IRA deduction rules. The potential tax benefit of a Trump Account comes from long-term, tax-deferred growth, rather than an immediate income-tax deduction.

How Are Trump Account Funds Invested?

While the child is in the growth period, the account generally must be invested in eligible mutual funds or exchange-traded funds that track the S&P 500 or another qualifying index of primarily U.S. companies. These investment restrictions are intended to keep the account focused on broad, low-cost equity exposure.

Because these funds invest in the stock market, the value of a Trump Account will fluctuate over time. Families should understand the investment risks and long-term nature of the account when considering how it fits within their broader savings strategy and overall financial plan.

When Can You Withdraw Money From A Trump Account?

Trump Accounts are designed for long-term savings. Withdrawals are generally not available before January 1 of the year the child turns 18, except in limited IRS-permitted circumstances, such as certain rollovers, corrections of excess contributions, or the death of the beneficiary.

After the growth period, the account generally follows traditional IRA rules. Withdrawals may be subject to income tax and an early withdrawal penalty unless an exception applies. For example, traditional IRA rules include exceptions for certain higher-education expenses and qualifying first-home purchases.

However, an exception from the early withdrawal penalty does not necessarily mean the withdrawal itself is income-tax-free.

How Do You Open a Trump Account?

Trump Accounts are not opened automatically. An authorized individual must elect to open an account for a child by completing IRS Form 4547. An authorized individual is a legal guardian, parent, adult sibling, or grandparent, generally in that order of priority.

To submit IRS Form 4547, families can use their IRS online account or download the official Trump Accounts app.

Before starting the process, families should have the child’s Social Security number, date of birth, and address available. If the child qualifies for the $1,000 federal contribution, the pilot-program election should also be completed as part of the Form 4547 process.

After the election is submitted, the authorized individual can monitor its status and follow instructions provided by Treasury, the IRS, or their agent to activate the account.

How Does A Trump Account Compare To Other Accounts?

The right account depends on what the money is for. A Trump Account is designed for long-term investing and may be particularly relevant when a child qualifies for the $1,000 federal contribution. Other accounts offer different tax benefits, investment options, and access to funds, depending on the family’s goals:

• Education funding: A 529 plan is designed for qualified education expenses and may provide tax-free qualified withdrawals.
• A child with earned income: A custodial Roth IRA may provide long-term tax-free growth, subject to Roth IRA eligibility and contribution requirements.
• Flexibility before adulthood: A UTMA, UGMA, or parent-owned brokerage account may provide greater flexibility for goals such as a vehicle, home, or general financial support.
• Long-term investing for a child: A Trump Account provides another way to invest for a child’s future and may complement the family’s existing education and investment strategies.

The chart below illustrates the differences between Trump Accounts and other account types. Click the image below to enlarge or download the table.

Click the image to enlarge and download.

In practice, these are rarely either-or decisions. A family might use a 529 plan as its primary education savings vehicle, open a Trump Account to take advantage of the $1,000 federal contribution for an eligible newborn, and maintain a UTMA or other account for expenses that may arise before college.

The appropriate mix will depend on the child’s age, the family’s goals, when the money may be needed, and the tax and investment characteristics of each account. Trump Accounts are another planning tool, not necessarily a replacement for 529 plans, custodial accounts, or other established savings strategies.

Families with children or grandchildren under 18, as well as business owners considering employer contributions, may want to contact their advisory team to discuss how Trump Accounts fit into their broader education, gifting, and long-term financial planning strategies.

Does a Trump Account Make Sense For Your Family?

Before opening or funding a Trump Account, families should consider several questions:

• Does your child qualify, including for the $1,000 federal contribution?
• What is the money ultimately intended to be used for?
• Might the child need access to the money before age 18?
• Are you comfortable with a Trump Account’s stock-market exposure and investment guidelines?
• How would a Trump Account fit alongside your existing education savings, gifting, and other investment strategies?

For many families, a Trump Account may serve as an additional long-term savings tool rather than a replacement for other accounts. For eligible children, the one-time $1,000 federal contribution provides an additional benefit, but the account should still be considered within the context of the family’s broader financial plan.

Next Steps

Trump Accounts may offer eligible children an early start on long-term investing, particularly for those who qualify for the $1,000 federal contribution. Like any savings vehicle, however, their value depends on how they fit within a family’s overall financial goals , contribution strategy, investment horizon, and need for flexibility.

Every family’s situation is different. If you have questions about whether a Trump Account makes sense for your family, or how it might coordinate with your existing financial planning strategies, we encourage you to reach out to your advisory team.

If you are not yet a client of Cassaday & Company, we would be happy to provide a complimentary, no-pressure second opinion of your current financial plan and goals. Please contact us at info@cassaday.com or (703) 506-8200.

The material presented above is solely for information purposes and has been gathered from sources believed to be reliable. However, Cassaday & Company cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Cassaday & Company, nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.