Trump Accounts Explained: How to Save and Invest for Kids in a New Era

With more ways than ever to save for children, families are asking an important question: What is a Trump Account—and is it better than a 529 plan or custodial account?

Beginning in mid‑2026, Trump Accounts are expected to become available, adding a new option to the children’s savings landscape alongside 529 plans, custodial (UGMA/UTMA) accounts, and Roth IRAs for minors. Understanding how these accounts work—and when they make sense—can help families make smarter, more coordinated decisions.

What Is a Trump Account?

A Trump Account is a custodial‑style traditional IRA for minors, created under federal law in 2025 and expected to become available starting July 2026.

Key features include:

• • The child is the legal owner of the account.

  • A parent or guardian manages the account until the child reaches age 18.

  • The account mirrors a traditional IRA structure, designed to jump‑start long‑term investing.

Initially, Trump Accounts will be established and administered by the U.S. Treasury. Over time, families may be able to move these accounts to participating financial institutions that offer Trump Account products.

Who Can Open One?

• • Children under age 18 with a Social Security number are eligible.

  • U.S. citizens born between January 1, 2025, and December 31, 2028, may qualify for a one‑time $1,000 federal seed contribution.

  • Only one Trump Account per child is permitted.

Children who don’t qualify for the seed contribution can still have a Trump Account opened on their behalf.

How Contributions Work

Trump Accounts allow up to $5,000 per child per year in combined individual and employer contributions. Government and charitable contributions do not count toward this limit but are taxable when withdrawn. Because different contribution sources receive different tax treatment, accurate records are essential for future withdrawals and rollovers.

Investment Rules: Simple, Low‑Cost—and Limited

Investment options in Trump Accounts are intentionally constrained:

• Investments must be low‑cost index mutual funds or ETFs
• At least 90% invested in U.S. equities
• No leverage permitted
• Expense ratio capped at 0.10%

This structure keeps costs low and promotes long‑term investing discipline. However, it also means:

• Limited diversification
• No built‑in reduction of risk as the child approaches adulthood

Families may need to manage overall portfolio risk elsewhere in their financial plan.

Tax Considerations and the Kiddie Tax

While Trump Accounts allow tax‑deferred growth, most withdrawals are ultimately taxed as ordinary income, not capital gains.

For young adults who are still dependents—especially college students—this can trigger the kiddie tax, meaning part of a withdrawal or Roth conversion could be taxed at the parents’ marginal rate rather than the child’s lower rate.

Planning note: Even withdrawals that avoid penalties can still create unexpectedly high tax bills if taken while the child is subject to kiddie tax rules.

How Trump Accounts Compare to Other Options

• 529 plans:
  Designed for education. Earnings grow tax‑free when used for qualified expenses and may offer state tax benefits.
• Custodial (UGMA/UTMA) accounts:
  Highly flexible, with no contribution limits (gift tax rules apply). Growth is taxable, but long‑term capital gains and tax‑planning strategies may be more favorable.
• Roth IRAs for minors:
  Require earned income, but offer tax‑free growth and greater withdrawal flexibility.

Trump Accounts differ by combining:

• • No earned‑income requirement
  • Strict pre‑18 withdrawal rules
  • Tax‑deferred (but taxable) growth

The HT Wealth Management Perspective

Trump Accounts may be a useful addition to the planning landscape—especially when families can capture the $1,000 seed contribution or employer funding. But they are not a one‑size‑fits‑all solution.

In most cases, the best outcomes come from coordinating multiple account types based on a family’s goals, tax situation, and need for flexibility. The account itself matters less than starting early, saving consistently, and making thoughtful decisions over time.