By Sharon Kampner, MBA, CFP®, Senior Wealth Advisor, Eric Rife, CFP®, CPWA®, Wealth Advisor, and Kerry Balagtas, CPA, Senior Director of Tax & Financial Planning
Most families are used to a familiar set of tools for saving on behalf of a child: a 529 plan, a custodial account, maybe a Roth IRA once a teenager starts earning income. The One Big Beautiful Bill Act introduced a first-of-its-kind savings vehicle aimed at expanding how families build long-term wealth for their children, and it works differently from anything most families have used before. The idea behind the accounts is straightforward: give children the chance to start life with a seed of investment capital, well before they have any earned income of their own. The law aims to broaden access to wealth-planning tools that have traditionally required either earned income or a parent already contributing on the child’s behalf.
That’s a meaningful shift, and it’s part of why we think this is worth understanding now rather than treating it as background noise. Contributions could not be made before July 4, 2026, so this is genuinely new, the rules are still being finalized, and the account interacts with tools families already use, like 529 plans, in ways that aren’t always intuitive. Below, we cover eligibility, contribution limits, how the money can be invested, and how these accounts compare to what you may already be doing.
Because this is an evolving area of tax law, treat this as a starting point for a conversation with your advisor, not a final answer for your specific situation.
Trump Accounts At-A-Glance
| Feature | Details |
| Eligibility (general account) | A child who has not turned age 18 before the end of the calendar year in which the election is made, is a U.S. citizen, and who has a valid Social Security number |
| Eligibility ($1,000 pilot contribution) | Additionally requires the child be born 2025 to 2028, be a qualifying child of the person opening the account, and be a U.S. citizen |
| Who can open the account | Generally, the child’s parent or legal guardian can open the account |
| Filing method | Form 4547 can be filed with an e-filed federal tax return, mailed as a paper copy, or submitted electronically through an IRS Online Account |
| Growth period | Runs from account opening through December 31 of the year the child turns 17 |
| Annual contribution limit | $5,000 combined from all individual and employer sources, adjusted for inflation after 2027 |
| Employer contribution cap | $2,500 per employee per year, counting toward the overall $5,000 limit rather than adding to it |
| Government pilot contribution | $1,000 one-time deposit for children born January 1, 2025 through December 31, 2028. This does NOT count toward the $5,000 annual limit |
| Tax treatment | Individual contributions are made with after-tax dollars and are not tax-deductible. Investment returns compound tax-deferred within the account but those gains are taxed as ordinary income once withdrawn. If withdrawn prior to age 59.5, distributions will incur a 10% penalty |
| Eligible investments | Specific low-cost index funds, with annual fees and expenses capped at 0.1% of the invested balance or less, and no use of borrowed money |
| Custodians | Bank of New York Mellon serves as Treasury’s financial agent, with Robinhood as brokerage and initial trustee |
| Distributions prior to age 18 | Generally not permitted, with exceptions for qualified rollovers, excess contributions, and distributions following the death of the beneficiary |
| On January 1st of the year the child turns 18 | IRC Section 530(a) treats the account much like a traditional IRA under IRC Section 408 |
What Is a Trump Account?
IRC Section 530A defines Trump Accounts as a new type of individual retirement account for eligible minors, with IRC Section 6434 setting out the $1,000 pilot program contribution. The legal foundation comes from the One Big Beautiful Bill Act, also known as the Working Families Tax Cut (Public Law 119-21), signed into law on July 4, 2025. Functionally, it behaves like an IRA that a child can have opened on their behalf well before they have earned income of their own.
Who Is Eligible?
Eligibility works in two layers, and it’s worth separating them clearly since they’re easy to conflate.
To have an account opened at all, the child must not have turned 18 before the end of the calendar year in which the election is made, must be a U.S. citizen, and must have a valid Social Security number.
To receive the $1,000 government pilot deposit specifically, the child must also have been born between 2025 and 2028, be a qualifying child of the person opening the account, and be a U.S. citizen with a valid Social Security Number.
Who can open the account: If you’re not seeking the $1,000 pilot contribution, you generally must be the child’s parent or legal guardian to file Form 4547.
One account per child. Only one Trump Account per child is allowed; if an election has already been made to open an account for a child, additional elections for the same child won’t be honored.
How Much Can You Contribute?
The $5,000 annual limit applies per child, per account, not per person contributing. In other words, the cap doesn’t multiply as more people contribute; it’s a shared ceiling across every source funding that one account each year.
Individual and employer contributions combined are subject to a $5,000 annual limit per child, adjusted for inflation after 2027. Contributions from nonprofits and governments outside the pilot program are not subject to that limit. Individual contributions from parents, family members, and others are made with after-tax dollars, are not tax-deductible, and can be made in cash only. Grandparents and other relatives can contribute, but all family contributions count toward that same shared $5,000 limit for the child.
Any amount an individual contributes to a Trump Account also counts toward that individual’s own annual gift tax exclusion ($19,000 per recipient in 2026). For most families contributing at or below the $5,000 account limit, this won’t come close to using up the exclusion, but it’s a relevant detail for grandparents or others already doing other annual gifting to the same child.
Employer Contributions
Employers can offer this as part of a cafeteria plan, and qualifying contributions are not considered taxable income to the employee, with the employer able to deduct the expense. The value is capped at $2,500 per employee per year, adjusted for inflation starting in 2027, and counts toward the same overall $5,000 limit rather than being additive to it.
The Government Pilot Contribution
Children born between 2025 and 2028 are eligible for a $1,000 government seed deposit, which sits outside the $5,000 annual cap. That government contribution will be taxable when it is eventually withdrawn.
Other Seeding Programs
Some private philanthropic commitments exist alongside the federal pilot on a limited, geography-specific basis. Details and current eligibility criteria are best confirmed directly from the .
How Is the Money Invested?
Funds are invested in a diversified portfolio of low-cost index funds, without the use of borrowed money, with annual fees and expenses capped at 0.1% of the invested balance or less. The default investment at launch is a broad S&P 500 ETF, with options limited to very low-cost, broad U.S. equity index funds. Families looking for exposure outside of mostly large-cap U.S. equities won’t currently find that option inside a Trump Account. There are expected to be five funds to choose from.
When Can the Money Be Used?
During the Growth Period, running from account opening through December 31 of the year the child turns 17, no distributions are generally permitted. That said, it isn’t an absolute lock: exceptions exist for qualified rollovers, excess contributions, and distributions triggered by the death of the beneficiary. A rollover to an ABLE account is also available at age 17 for eligible beneficiaries.
Once the Growth Period ends, IRC Section 408(a) treats the account much like a traditional IRA, and withdrawals may then be used for education or up to $10,000 for a first-time home purchase without the usual 10% early-withdrawal penalty. However, we should note that income tax may still be due on that withdrawal. After the growth period, a Trump Account is not aggregated with the beneficiary’s other IRAs when calculating the taxable and nontaxable portions of distributions, which can matter when deciding which account to withdraw from or convert first.
Trump Accounts vs. 529 Plans
This is the comparison we hear most often from families already funding a 529, and it’s worth its own space rather than a footnote.
Because a Trump Account is owned by the child, it may be treated differently than a parent-owned 529 plan for financial aid purposes. The IRS has not yet issued formal guidance on this point, so families weighing financial aid alongside these accounts should raise it directly with their advisor or a financial aid professional.
Because a Trump Account is legally structured as a traditional IRA, the account balance itself is generally excluded from the FAFSA asset calculation, the same treatment given to other retirement accounts. Official guidance from the Department of Education on how Trump Accounts specifically should be reported is still pending, so this is the expected treatment based on how other retirement accounts are handled, not a finalized rule. The more relevant financial aid consideration is timing: withdrawals from the account after age 18 may be counted as student income on the FAFSA in the year they’re taken, which can reduce aid eligibility on subsequent filings. A parent-owned 529 plan works differently, it’s reported as a parent asset while the funds sit in the account, but qualified education withdrawals don’t count as income the way a Trump Account withdrawal would.
Some families will find room to fund both a 529 and a Trump Account; others may reasonably prioritize one based on their aid expectations and savings goals. This is a planning conversation, not a one-size-fits-all answer.
What Could Compounding in a Trump Account Look Like?
The numbers below are hypothetical illustrations only. They assume a constant 7% annual rate of return with no taxes, fees, or additional contributions factored in, purely to show how time in the market affects a single contribution. Actual investment returns will vary, may be negative in any given year, and are not guaranteed. Nothing below should be read as a projection or promise of actual account performance.
| Scenario | Contribution Pattern | Starting Age | Years of Growth | Illustrated Value at Age 18 |
| 1 | One-time $1,000 contribution | Birth (age 0) | 18 years | ~$3,380 |
| 2 | One-time $5,000 contribution | Age 6 | 12 years | ~$11,260 |
| 3 | $5,000 contributed annually | Birth through age 17 | 18 years of contributions | ~$186,000 |
| 4 | $5,000 contributed annually | Age 6 through age 17 | 12 years of contributions | ~$89,000 |
A few things worth noting across all four scenarios:
- The gap between Scenarios 1 and 2 comes entirely from the size of the initial contribution and the number of years it has to compound. The roughly $97,000 gap between Scenarios 3 and 4 comes entirely from six additional years of contributions and compounding, not from a larger contribution amount.
- None of the figures above include the $1,000 government pilot deposit, additional contributions from other family members or an employer, or the tax treatment that applies on eventual withdrawal, all of which would change the actual outcome for any specific family.
- All scenarios assume the contributions are made on January 1 each year for illustration purposes.
Frequently Asked Questions
Does converting to a Roth IRA at 18 avoid the FAFSA impact?
No. Converting to a Roth IRA does not change the FAFSA asset classification; both traditional and Roth IRAs owned by the student are reported as student assets. The timing of a conversion and any withdrawals can still affect FAFSA reporting in specific filing years.
Can grandparents open a Trump Account?
Possibly, only if there is no available legal guardian, parent, or adult sibling to do so. Grandparents can contribute to an existing account regardless of who opened it.
Where can I check the status of a submitted Form 4547?
Taxpayers can view the latest submission status of their Form 4547, including next steps, directly in their IRS Individual Account, and can also submit Form 4547 electronically there.
Is this guidance final?
No. The IRS and Treasury released proposed regulations on March 6, 2026, detailing how families can open Trump accounts and claim the $1,000 pilot program contribution, marking a step toward operationalizing the program rather than a finished rulebook. Additional regulations are expected, and state-level tax treatment is still developing state by state. Not all states will conform with federal rules.
Can a child have more than one Trump Account?
No. A child can only have one Trump Account containing money at any time, the initial Treasury-held account, unless and until it is rolled over.
A Note From One of Our Advisors
One of our own advisors recently went through the Form 4547 process for his own child. We share this only as a walkthrough of the mechanics, not as advice on whether or how to fund one for your own family. The election itself was straightforward:
- Submit the form (either with a tax return or electronically)
- Wait for an activation notice
- Complete a short account application confirming the child’s Social Security number against the election.
- The $1,000 government contribution and Robinhood account setup followed from there.
Where This Leaves You
Trump Accounts are new enough that the rules will keep shifting, and the right approach depends heavily on your family’s specific situation: whether you’re already funding a 529, whether financial aid is a factor, and how you want to think about basis, taxation, and control once your child turns 18. There’s no single right answer for every family, and getting the sequencing right (how much to fund, from which sources, and how it interacts with other accounts) is worth a real conversation rather than a guess.
If you’d like to talk through whether a Trump Account makes sense alongside your existing savings and investment strategy, reach out to your Mason advisor or click here to schedule a consultation. We’re tracking the regulatory developments closely and can help you think through the specifics for your family.
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Sharon Kampner, MBA, CFP®, is a Senior Wealth Advisor at Mason Investment Advisory Services.
Eric Rife, CFP®, CPWA®, is a Wealth Advisor at Mason Investment Advisory Services specializing in concentrated equity positions and executive compensation planning.
Kerry Balagtas, CPA, Senior Director of Tax & Financial Planning at Mason Investment Advisory Services.
The information provided in this article is for educational purposes only and does not constitute financial, legal, or tax advice. Please consult a qualified financial professional regarding your specific situation.
