Trump Accounts: What Parents and Business Owners Need to Know

What Is This This Trump Account I Keep Hearing About?

One of the newest savings vehicles available to families is the Trump Account. While the name has generated plenty of headlines, the concept is fairly straightforward. Trump accounts are long-term investment account designed to help children begin building wealth from an early age. Trump accounts essentially function similar to an IRA.

For children born between January 1, 2025, and December 31, 2028, the federal government will contribute $1,000 to get the account started. Beyond that, family members, employers, and others can make additional contributions over time subject to annual limits.

Who Can Open One? And How Do I Open One?

A parent or legal guardian must establish the account on the child's behalf, either by submitting IRS Form 4547 or through the official Trump Accounts enrollment website once available. While accounts may be established before funding begins, contributions—including the government's $1,000 deposit—are not expected to occur until the program's funding date, currently scheduled for July 4, 2026.

Any U.S. citizen child under age 18 with a valid Social Security number can have a Trump Account. However, only children born between January 1, 2025, and December 31, 2028, are eligible for the government's $1,000 seed contribution.

Each child may have only one Trump Account.

How Much Can Be Contributed?

In addition to the government's $1,000 contribution (for select children), up to $5,000 per year can be contributed to a child's account. Contributions may come from parents, grandparents, relatives, friends, employers, and certain charitable organizations. Contributions are made on an after-tax basis, and don’t generate a current-year deduction on personal tax returns.

What is the Account Invested In?

The money is invested in broadly diversified U.S. stock index funds. This isn't a brokerage account where individual stocks, options, or speculative investments can be purchased, nor will there be a universe of actively managed mutual funds to choose from.

When Can the Money Be Used?

This is where Trump Accounts differ significantly from a 529 plan.

Parents should assume that money contributed to a Trump Account is largely locked up for the long haul. There are no broad hardship withdrawal provisions for emergencies, unexpected expenses, or other financial needs that may arise during childhood.

Once the child reaches age 18, limited distributions may be available for certain purposes, including qualified higher education expenses and a first-time home purchase. However, the account is still subject to restrictions, and withdrawals that do not meet the applicable requirements may result in taxes and penalties.

For distributions taken before age 59½, the earnings portion may be subject to both ordinary income tax and an additional 10% penalty unless an exception applies. As a result, Trump Accounts are generally not well-suited for short-term savings goals.

Instead, the account is designed to encourage long-term investing.

Is a Trump Account Worth Opening?

For families with children eligible for the government's $1,000 contribution, claiming the free seed money is a slam dunk.

The bigger question is whether future savings dollars for a family should go into a Trump Account, a 529 plan, a Roth IRA (if the child has earned income), or another investment account. Trump Accounts are best viewed as another tool in the toolbox. The right answer depends on your family's goals, current retirement savings, tax situation, and time horizon.

Can Business Owners Contribute?

The law allows employers to establish a formal, written Trump Account contribution program and contribute up to $2,500 annually per employee for an employee or an employee's dependent child. Those employer contributions are generally deductible to the business and are not included in the employee's taxable income. Note the use of the "per employee” language. Let’s assume Employee A has one minor child and Employee B has two minor children. If both Employees A and B receive the maximum $2,500 contribution allowed from their Employer, the benefit may be muted for Employee B since they have multiple dependents. The employer contribution also counts toward the $5,000 annual limit from all sources.

Business owners, especially those with closely held businesses, should be careful before assuming this is an easy tax deduction for their own children.

The law borrows many of the same nondiscrimination rules that apply to Section 129 dependent care assistance programs. Essentially, Congress does not want business owners creating a program that benefits only themselves while excluding employees and their employees’ dependents.

For example, if a business owner contributes for their own child but does not offer a similar benefit to eligible employees, the arrangement could run into compliance issues. Additional guidance is expected, but closely held businesses should work with their tax advisor before implementing a Trump Account contribution program.

A Promising Opportunity, But Questions Remain

The IRS will be releasing additional guidance in the coming months, and some of the most important planning questions have yet to be fully answered.

For now, Trump Accounts appear to offer a compelling opportunity for long-term investing, particularly for families eligible for the government's $1,000 seed contribution. As the rules continue to evolve, families should take the time to understand both the benefits and the limitations before making significant contributions. At Opulent Wealth, we help families evaluate how Trump Accounts make sense alongside other financial priorities. Reach out today to learn more.