Trump Account Basics: A New Way to Start Saving for Your Grandchildren
Many retirees think about wealth transfer later in life, often after they have finalized their own retirement income plans. For grandparents, one growing priority involves helping grandchildren build a financial foundation early. A new type of account, known as a Trump account, offers one potential way to do that.
Trump accounts were introduced under the One Big Beautiful Bill Act, signed into law on July 4, 2025. Lawmakers designed these accounts to help families begin long-term investing for children at an early age. The rules governing these accounts are still evolving and remain subject to additional IRS and Treasury guidance. While it’s usually the parents who open these accounts, grandparents can also play a meaningful role by contributing.
What Is a Trump Account?
A Trump account is a tax-advantaged investment account created for U.S. citizen children under age 18. The intent is to start retirement-style investing early and allow time for long-term growth. Because this account structure is new, families should carefully review current guidance and recognize that interpretations may change. In practice, the rules deserve careful attention, especially for families already managing multigenerational wealth.
One of the most notable features involves a federal contribution. Every child born between January 1, 2025, and December 31, 2028, qualifies for a one-time $1,000 government contribution. A parent or guardian must make an election to receive this deposit. This contribution does not count toward annual contribution limits under current statutory language.
How to Establish a Trump Account
Families can establish a Trump account through processes outlined in the statute, subject to future administrative guidance. They may be required to file IRS Form 4547 with their tax return or apply directly through the federal Trump accounts website. Initially, the U.S. Treasury will select the custodian that serves as trustee. The account may later be rolled over to another financial institution once rollover rules are formally implemented.
Contribution Rules Grandparents Should Know
After the account is established, parents, grandparents, or other individuals may contribute on behalf of the child. Total annual contributions cannot exceed $5,000 per year, including employer contributions. The federal $1,000 contribution does not count toward this limit based on current law.
Contributions can begin on July 5, 2026, and must be made during the calendar year itself. Unlike IRAs, prior-year contributions are not allowed. Contributions are made with after-tax dollars, and no tax deduction is available. These contributions also do not affect IRA or employer retirement plan contribution limits.
Investment Limitations Inside the Account
Investment options within a Trump account remain limited. Assets must be invested in low-fee mutual funds or ETFs that track broad U.S. equity indexes. These limitations may restrict diversification and expose account holders to equity market risk. These restrictions are designed to keep costs low and encourage long-term growth rather than short-term trading or complex strategies.
Withdrawal and Tax Considerations
Children cannot access funds before the calendar year they turn 18. After that point, they may withdraw funds for any reason, but taxes and penalties may apply. Withdrawals before age 59.5 generally trigger a 10 percent early withdrawal penalty unless an exception applies. Earnings are subject to ordinary income tax.
Not all contributions receive the same tax treatment. Contributions made by parents or grandparents represent after-tax dollars and may be withdrawn tax free. Government and employer contributions are taxable when distributed. All withdrawals follow a pro-rata rule, meaning each distribution includes both taxable and non-taxable portions under current statutory assumptions.
Required Distributions and Roth Conversions
Trump accounts include required minimum distributions later in life. These accounts cannot be aggregated with other IRAs when allocating basis. Once a child reaches age 18, Roth IRA conversions are allowed under the same rules that apply to traditional IRAs.
Open Questions Around Gift Taxes
As of early 2026, guidance remains unclear on whether contributions to Trump accounts require filing a gift tax return. Because beneficiaries cannot access funds until age 18, the IRS has not yet confirmed whether these contributions qualify as present-interest gifts. Further guidance is expected.
How Trump Accounts May Fit Into a Broader Plan
For retirees, Trump accounts can serve as one component of a broader multigenerational planning strategy. They do not replace 529 plans, trusts, or direct gifting strategies. Instead, they offer a way to introduce long-term investing early while keeping assets earmarked for retirement-style use.
As with any planning strategy that spans generations, details matter. Contribution limits, withdrawal rules, tax treatment, and coordination with existing estate plans all deserve careful review. Families may wish to evaluate how these accounts interact with their broader financial and estate planning framework.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment or tax advice from Savant. Please consult your investment or tax professional regarding your unique situation.
Joseph P. Marmorato
Senior Tax Strategy Advisor
CFP®, CPA