Trump Accounts: New Ways to Support a Child’s Financial Future

For parents and guardians, planning for a child’s future often means balancing current expenses with longer-term goals such as education, financial independence, and retirement.

Childcare, healthcare, education, and insurance protection can all place demands on a family’s resources. When circumstances permit, setting aside money early may give those assets more time to grow. No single account is appropriate for every objective, however. Families should evaluate available strategies in light of their goals, time horizon, liquidity needs, tax circumstances, and tolerance for investment risk.

Trump Accounts are a new planning option for children

Section 530A of the Internal Revenue Code created accounts commonly known as “Trump Accounts.” These accounts are a type of individual retirement account established for an eligible child and subject to special contribution, investment, and distribution rules during the period before the child reaches age 18.

A child born from January 1, 2025, through December 31, 2028, may qualify for the one-time $1,000 federal pilot-program contribution if the child is a U.S. citizen, has a valid Social Security number, and satisfies the election and other statutory requirements. Eligibility for the pilot contribution is narrower than eligibility to establish a Trump Account.

As of July 15, 2026, the U.S. Department of the Treasury reported that more than 6.5 million families had signed up for Trump Accounts, including more than 1.5 million children eligible for the $1,000 pilot contribution.

 

Important features of Trump Accounts include:

• Contributions generally may be made during the growth period without the child having earned income.

• During the growth period, investments are limited to funds permitted under the federal program. At launch, all contributions are invested in the State Street SPDR Portfolio S&P 500 ETF (SPYM).

• Treasury has selected four additional low-cost U.S. equity index ETFs and expects to make participant investment elections available in the future. Until Treasury announces that functionality, contributions remain invested in the default fund. Program rules and available investments may change.

• Distributions generally are restricted until January 1 of the calendar year in which the beneficiary turns 18. Limited exceptions may apply during the growth period.

• After the growth period, the account is generally treated as a traditional IRA. The taxable portion of a distribution may be subject to ordinary income tax and a 10% additional federal tax unless an exception applies.

• Ordinary contributions from individuals and employers are generally subject to a combined annual limit of $5,000 during the growth period.

• Employer contributions may not exceed $2,500 annually and count toward the $5,000 combined limit. When made through a qualifying employer program, an eligible employer contribution generally is not included in the employee’s taxable income.

• Pilot-program contributions, qualified general contributions, and qualified rollover contributions are not subject to the ordinary $5,000 annual limit.

• Different contribution types may receive different tax and basis treatment.

 

Trump Accounts should generally be viewed as one potential component of a broader financial plan—not as a replacement for emergency savings, education accounts, retirement planning for parents, or other established strategies.

 

The potential effect of starting early

A longer investment period provides more opportunity for compound growth, but it also exposes an investor to market fluctuations for a longer period. Returns are not guaranteed, and investments can lose value.

The chart presents hypothetical ending values for a single $1,000 investment made at different ages and held until age 65. It demonstrates the mathematical effect of time and compounding under three assumed constant rates of return.

For example, under the stated 7% constant-return assumption, investing at age 30 instead of age 35 results in a $3,064 difference in hypothetical value at age 65. This is a mathematical illustration—not a projection or representation of an expected investment result.

Chart disclosure:

Hypothetical illustration only; not representative of any actual investment, account, or investment strategy. Assumes a single $1,000 investment, annual compounding at a constant 3%, 5%, or 7% rate, no additional contributions or withdrawals, and reinvestment of earnings through age 65.

The illustration does not reflect market fluctuations or the deduction of investment fees, expenses, taxes, or inflation. Actual returns are not constant, may be lower or negative, and cannot be predicted or guaranteed. Source: Clearnomics.

Comparing common accounts for children

Families have several account types available when saving or investing for a child. Each has different ownership, contribution, taxation, distribution, and financial-aid characteristics.

529 plans

A 529 plan is generally designed to fund qualified education expenses. A parent, grandparent, or another person generally owns and controls the account and designates the beneficiary.

Contributions are made with after-tax dollars. Earnings may be withdrawn free of federal income tax when applicable requirements are met and the money is used for qualified education expenses.

The earnings portion of a nonqualified withdrawal may be subject to ordinary income tax and a 10% additional federal tax unless an exception applies. State tax treatment varies, and a nonqualified withdrawal may also result in the recapture of state tax benefits.

Federal law does not impose a uniform annual contribution ceiling, but individual 529 programs impose aggregate account limits. Contributions are also subject to federal gift- and estate-tax rules.

For 2026, the federal annual gift-tax exclusion is $19,000 per donor, per beneficiary. A contribution above that amount does not necessarily create an immediate gift-tax liability, but the donor may be required to file a federal gift-tax return and may use a portion of the donor’s lifetime gift- and estate-tax exemption.

Custodial Roth IRAs

A custodial Roth IRA is established for a minor who has eligible compensation.

For 2026, total contributions to all of the child’s traditional and Roth IRAs generally cannot exceed the lesser of $7,500 or the child’s eligible compensation for the year. Other IRA eligibility and contribution rules remain applicable.

Contributions are made with after-tax dollars. Qualified distributions are federally income-tax-free, while nonqualified distributions are subject to Roth IRA ordering and tax rules.

Although certain amounts may be accessible before retirement, an early withdrawal reduces the assets available for potential long-term growth.

UGMA and UTMA accounts

Accounts established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act allow an adult custodian to manage property that belongs irrevocably to a minor.

The assets generally may be used for the minor’s benefit, subject to applicable state law. When the beneficiary reaches the state-law age of termination, the beneficiary typically receives direct control of the property and may use it for any purpose.

Income and realized gains may be taxable to the child, and the kiddie-tax rules may apply. For federal financial-aid purposes, UGMA and UTMA property is generally reported as an asset of the student.

Because a completed UGMA or UTMA transfer is generally irrevocable, donors should consider the loss of control, potential tax consequences, financial-aid treatment, and the beneficiary’s eventual access to the property.

Using the five-year 529 gift-tax election

Federal tax law allows a donor to elect to treat a 529 contribution as having been made ratably over five years.

With the federal annual gift-tax exclusion at $19,000 in 2026, one donor could elect this treatment for a contribution of up to $95,000.

Two spouses could potentially contribute as much as $190,000 if each spouse makes or is treated as making one-half of the gift and all applicable requirements are satisfied.

The donor must generally file Form 709 to make the five-year election. The election uses the donor’s annual exclusions for that beneficiary during the applicable five-year period. Other gifts to the beneficiary, gift-splitting, and the donor’s death during the election period can affect the tax treatment.

The five-year election should be coordinated with the donor’s broader gifting and estate-planning strategy.

 

Financial-aid considerations

Account ownership can affect how assets are reported for federal financial-aid purposes.

When parent information is required on the Free Application for Federal Student Aid, qualified education benefits and education savings accounts, including a parent-owned 529 account, generally are reported as parent assets.

UGMA and UTMA accounts owned by the student, by comparison, generally are reported as student assets regardless of whether parent information is required.

Financial-aid formulas, institutional methodologies, and account-reporting rules can change. Colleges that use supplemental aid applications may also treat assets differently from the federal methodology. Families should review the rules in effect when an application is prepared.

 

Gifting appreciated securities

Transferring appreciated securities to an UGMA or UTMA account does not automatically eliminate capital-gains tax. The child generally receives the donor’s tax basis, and a later sale may produce a taxable gain.

The result depends on the donor’s basis, the value and holding period of the securities, the child’s other income, the kiddie-tax rules, applicable state taxes, and other circumstances. A transfer can also affect financial-aid eligibility and is generally irrevocable.

Families considering a gift of appreciated property should consult their tax and legal professionals before completing the transfer or selling the assets.

 

Understanding the kiddie tax

The kiddie tax may apply when a child has unearned income above the applicable threshold and satisfies the age, student, support, filing, and other statutory requirements.

Under the IRS’s 2026 draft Form 8615 instructions available as of August 12, 2026, Form 8615 generally applies when an affected child has more than $2,700 of unearned income and is required to file a federal income-tax return. Taxpayers should confirm the amount using the final 2026 instructions when issued.

Some income may be taxed at the child’s rate, while the child’s net unearned income may be taxed using the parent’s rate if that rate is higher.

Investment income in an UGMA or UTMA account may be subject to these rules. Trump Account distributions are governed principally by the applicable IRA rules and require a separate analysis based on the beneficiary’s circumstances.

Because tax results vary, this material should not be used to determine a specific child’s tax liability.

 

Historical market growth and investment risk

Over the period shown, U.S. stocks produced higher cumulative historical returns than the Treasury-bond and inflation series. That result was accompanied by substantial volatility, including periods in which stock values declined significantly.

Historical results do not establish what an investor will earn in the future. Results experienced by an actual investor will depend on investment selection, contribution and withdrawal timing, fees, expenses, taxes, inflation, and investor behavior.

The chart uses a logarithmic scale to compare the hypothetical cumulative growth of $1 across the S&P Composite total-return series, a 10-year Treasury-bond series, and cumulative inflation. The latest data point shown is July 2026.

The inflation series represents the cumulative change in consumer prices and is included as a purchasing-power benchmark. It is not an investment return or an investable asset.

Chart disclosure:

Historical estimates are presented for illustrative purposes only and do not represent the performance of an actual account or investment strategy. The stock results reflect the S&P Composite total-return series identified in Clearnomics’ supporting documentation. Treasury-bond results are based on the methodology maintained in Clearnomics’ supporting calculations. Inflation reflects cumulative changes in consumer prices and is not an investment return.

Values are nominal, use a logarithmic scale, and do not reflect investment-management fees, transaction costs, taxes, or other expenses. Indexes are unmanaged and cannot be invested in directly. Past performance does not guarantee future results. All investments involve risk, including possible loss of principal.

Sources: Clearnomics, Robert Shiller, Standard & Poor’s, and the U.S. Bureau of Labor Statistics. Data through July 2026.

Planning priorities matter

Saving for a child is an important goal, but it should be considered alongside the family’s overall financial circumstances. Parents may need to prioritize emergency reserves, insurance protection, debt management, and their own retirement security before committing substantial assets to a child-owned or restricted account.

Factors to consider include:

• The intended purpose of the money
• The expected investment period
• The need for access before the child reaches adulthood
• Investment risk and possible loss
• Federal and state tax treatment
• Financial-aid consequences
• The identity of the account owner
• When the child will receive control of the assets
• The effect of making an irrevocable gift
• Contribution and distribution restrictions
• Fees and available investment options

A family may ultimately use more than one account. For example, a 529 plan may address education expenses, a custodial Roth IRA may be appropriate when a child has eligible compensation, and a Trump Account may provide another source of long-term retirement savings.

The appropriate combination depends on the family’s goals and circumstances.

 

The bottom line

Starting early may give a child’s savings more time to grow, but time alone does not eliminate investment risk or guarantee a particular result.

Trump Accounts expand the planning choices available to families. Their restrictions, tax treatment, and long-term focus make it important to evaluate them alongside 529 plans, custodial Roth IRAs, UGMA or UTMA accounts, and the family’s other financial priorities.

Parents and guardians should consult appropriately qualified financial, tax, and legal professionals before selecting an account, making a substantial gift, transferring appreciated property, or taking a distribution.

 

References

1. U.S. Department of the Treasury, “Treasury Announces Frank Bisignano to Lead Next Phase of Trump Accounts Expansion,” July 15, 2026:
   https://home.treasury.gov/news/press-releases/sb0563
2. Internal Revenue Service, “Treasury, IRS Issue Guidance on Trump Accounts Established Under the Working Families Tax Cuts”:
   https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-trump-accounts-established-under-the-working-families-tax-cuts-notice-announces-upcoming-regulations
3. Internal Revenue Service, Instructions for Form 4547, Trump Account Election(s):
   https://www.irs.gov/instructions/i4547
4. U.S. Department of the Treasury, “Treasury Announces Investment Lineup for Trump Accounts,” July 1, 2026:
   https://home.treasury.gov/news/press-releases/sb0551
5. Internal Revenue Service, “401(k) Limit Increases to $24,500 for 2026; IRA Limit Increases to $7,500”:
   https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
6. Internal Revenue Service, “529 Plans: Questions and Answers”:
   https://www.irs.gov/newsroom/529-plans-questions-and-answers
7. Internal Revenue Service, Revenue Procedure 2025-32:
   https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
8. Internal Revenue Service, “Tax on a Child’s Investment and Other Unearned Income”:
   https://www.irs.gov/taxtopics/tc553
9. U.S. Department of Education, 2026–27 FAFSA Form:
   https://studentaid.gov/sites/default/files/2026-27-fafsa-form.pdf

Index description

S&P Composite

The S&P Composite is a historical U.S. equity-market series used in this illustration. It incorporates the S&P 500 for applicable periods and predecessor market data for earlier periods, based on the methodology identified in the supporting source documentation.

The series assumes reinvestment of dividends. Indexes are unmanaged, do not reflect fees or expenses, and cannot be invested in directly.

General disclosure

This material is provided for general informational and educational purposes only. It is not intended as individualized investment, tax, accounting, financial-aid, or legal advice and does not constitute a recommendation or offer to buy or sell any security or adopt any investment strategy.

The information reflects laws, limits, and government guidance available as of August 12, 2026. The information is obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Tax laws, financial-aid rules, account limits, and government-program requirements are complex and subject to change.

Consult appropriately qualified investment, tax, and legal professionals regarding your particular circumstances. Investing involves risk, including possible loss of principal. No investment strategy can assure a profit or protect against loss.