Think your family missed out because your child wasn’t born in 2025? Not necessarily. One of the biggest misconceptions surrounding Trump Accounts is that they are only for newborns. While the $1,000 federal seed contribution is limited to children born between January 1, 2025, and December 31, 2028, any eligible U.S. child under age 18 with a valid Social Security number can have a Trump Account established on their behalf.
The new Trump Account is a tax-deferred investment account designed to help children begin building wealth at an early age. Although much of the attention has focused on the federal seed contribution, many families are overlooking the fact that older children can participate as well. For parents and grandparents looking for another way to save for a child’s future, understanding how these accounts work is key.
Opening an account is relatively straightforward. A parent, legal guardian, or other authorized individual establishes the initial account by filing IRS Form 4547, either electronically through an IRS Online Account or by paper filing. After the election is processed, the account is activated through the Treasury’s Trump Accounts platform. Once established, contributions can come from multiple sources, including parents, grandparents, relatives, friends, and even employers. Generally, contributions are limited to $5,000 per child annually, regardless of the number of contributors. The $1,000 Treasury seed contribution for eligible newborns does not count toward the $5,000 annual contribution limit.
Investment options are intentionally simple. Funds must generally be invested in low-cost mutual funds or ETFs that track an index primarily composed of U.S. companies, such as an S&P 500 index fund or a similar broad-market fund. Unlike traditional brokerage accounts, Trump Accounts do not permit investing in individual stocks, cryptocurrency, or other more speculative investments. The goal is to encourage long-term growth through diversified investing while keeping costs low.
Families should also understand that these accounts are designed for long-term saving. Withdrawals generally are not permitted before age 18 except in limited circumstances. After the child reaches age 18, the account generally follows tax rules similar to those applicable to traditional IRAs. Distributions may be taken for purposes such as higher education expenses, a first-time home purchase, or other uses permitted under the applicable rules. Distributions that do not meet the applicable requirements may be subject to ordinary income tax and an additional 10% tax.
There are several important planning considerations to keep in mind. Contributions are made with after-tax dollars and do not provide a current-year tax deduction. In addition, qualifying employer contributions of up to $2,500 per year count toward the child’s annual $5,000 contribution limit, so families should coordinate contributions throughout the year to avoid exceeding the cap. Guidance is still developing regarding how Trump Accounts may affect eligibility for need-based financial aid, making it important for families with college-bound children to monitor future guidance.
For many families, a Trump Account may serve as a useful complement to other planning tools such as 529 plans, Roth IRAs, and traditional investment accounts. Whether it is the best choice will depend on a family’s objectives, anticipated education expenses, and the child’s earned income. The potential for tax-deferred growth, combined with the possibility of a government-funded contribution for eligible newborns, makes it an attractive option worth considering. As with any financial strategy, understanding the rules upfront can help families maximize the benefits while avoiding unexpected taxes or penalties down the road.
The rules governing Trump Accounts are still evolving, and additional IRS and Treasury guidance may be issued. Families should consult their tax advisor regarding their specific circumstances.
If you have questions about how Trump Accounts may fit into your family’s broader tax and financial planning strategy, contact your emc advisor to discuss the options available to you.