The Parents’ Guide to Opening and Managing Trump Accounts

One of the main requirements of Trump Accounts is that withdrawals are restricted from account opening to December 31 of the year before the child turns 18. Once the child turns 18, the account transitions from the growth period to functioning like a Traditional IRA.

In this article, we’ll explore the fundamentals of Trump Accounts, including who is eligible for the Federal Pilot Program, how to establish this account, and ongoing contribution rules and limits. We will also talk about investment restrictions and growth opportunities, helping you maximize your child’s account.

Since Trump Accounts are a new type of account, the granular details are still being worked out by legislators. The best way to stay informed about changes is to visit TrumpAccounts.gov.

Since the government wants to encourage widespread participation, there are only a few qualification criteria for establishing a Trump Account. The two main criteria are that the child must be a U.S. citizen and have a valid Social Security Number (SSN). Another stipulation for opening a Trump Account is that the individual must be under the age of 18 before the close of the calendar year. Unlike Traditional IRAs, your child does not need earned income to contribute to this account. However, each child is limited to one primary Section 530A account.

To kick-start funding Trump Accounts, the government is offering a $1,000 Pilot Program. Children born between January 1, 2025, and December 31, 2028, can receive a $1,000 initial deposit. The child must have a SSN to qualify for this upfront contribution, which means you may need to wait to file your tax return if your child was born near the end of the year. For children under the age of 18 born before 2025, Michael and Susan Dell have pledged to fund 25 million children’s accounts with $250 each.

There are a few different ways to open a Trump Account. The easiest way is to make the election with your filed tax return on Form 4547. The IRS will then forward this information on to the Secretary of the Treasury, who will open (and fund under the Federal Pilot Program) the account on your behalf. There are a few pieces of information you will need to file this form:

• Parent, guardian, or other authorized individual information, including their first and last name, SSN, address, date of birth, phone number, and email address.
• Child information, including their first and last name, address, date of birth, SSN, and relationship to the authorized individual.

One of the most important factors to remember when filing this form is that you must check Box 7 under Part III if your child is eligible to receive the Pilot Program contribution. Forgetting to check this box can prevent you from receiving the $1,000 deposit. Amending a return to check this box is not allowed. If you forget to check the box, there is no workaround to retroactively receive the deposit.

Filing Form 4547 with your tax return is non-negotiable if you want to receive the $1,000 Pilot Program contribution. However, even if your child does not qualify for this initial deposit, you can still use this form to have the Secretary of the Treasury open an account for your child. To prevent fraud, the Treasury Department requires an authentication process. Information will be sent out to the listed authorized individual on Form 4547 starting in May 2026. Responding to Treasury requests quickly will be essential to receive Pilot Program deposits timely.

The other way to open a Trump Account is to use TrumpAccounts.gov for online enrollment. This website is set to go live on July 5, 2026. If your child is eligible for the Dell contributions, the claiming process will also be facilitated through this website.

The goal of Trump Accounts is to provide an investment avenue to fund expenses later in life, like retirement and education. The government offers five different ways to make contributions:

1. Using the Pilot Program to receive a $1,000 deposit
2. Receiving qualified general contributions from state governments
3. Having your employer make a contribution (not subject to payroll taxes up to $2,500 annually)
4. Making a qualified rollover contribution
5. Submitting a direct contribution, such as from the account beneficiary, parent, guardian, or other authorized individual

The taxability of contributions depends on the timing and method. Direct contributions made during the growth period (before the child turns 18) are made on an after-tax basis, meaning that the earnings are only taxed upon withdrawal. Contributions from other sources, such as by an employer, state, or the federal government, are generally pre-tax, meaning both earnings and the basis are taxable upon withdrawal. Regardless of your contribution method, the account grows tax-free until funds are withdrawn.

Let’s look at an example. Your child receives the $1,000 Pilot Program deposit and you decide to add another $1,000 to their account. Funds in the account grow to $2,500. Assuming there are no penalties on the withdrawal, $1,500 of the distribution would be taxable ($1,000 Pilot Program contribution plus $500 in growth). The $1,000 you contributed is excluded from taxation since it was made with post-tax dollars.

Contributions are subject to a $5,000 annual limit, which will be indexed for inflation. However, contributions from federal and state governments and charitable grants do not count towards this limit. Let’s say that you have a child born in 2025. In 2026, you can receive the $1,000 Pilot Program deposit and contribute another $5,000 during the year.

While Trump Accounts work like an IRA, they have limited investment options. Funds must be placed in low-cost, non-leveraged U.S. equity index funds. Similarly, the annual fees and expenses of the investment must not exceed 0.1% of the balance of the investment in the fund. Funds that hold assets intended to decrease or increase volatility or risk associated with the index or funds that are inverse to the performance of the index are specifically excluded investments. The rules and restrictions surrounding investments are at the Treasury’s discretion, meaning they are subject to change.

Further restrictions appear in withdrawals. Withdrawals are not permitted during the growth period, which is before the child turns 18. There are a few exceptions, such as death or excess contributions. Withdrawing funds before the age of 18 will trigger a 10% early withdrawal penalty and ordinary income taxes, similar to early withdrawals from IRAs. Once the child turns 18, there are still restrictions on fund use. Distributions from Trump Accounts are subject to the normal IRA rules unless used for certain education expenses, home purchases up to $10,000, birth or adoption costs up to $5,000, or qualifying medical expenses.

While Trump Accounts are relatively new, there are a few additional considerations to evaluate as you open, fund, and withdraw from these accounts.

Maintain Account Separation

Even though the account converts to a standard Traditional IRA on January 1 of the year the child turns 18, it can be beneficial to avoid rolling over the funds to a different IRA account. By keeping the funds separate, you have the potential to avoid early withdrawal penalties. Trump Accounts have no withdrawal penalties once the age of 18 is met and the funds are used for qualifying purposes, while Traditional IRA accounts can impose early withdrawal penalties if funds are removed before age 59 ½.

Consider Roth Conversions

Young adults are typically just starting out their careers. This means that Roth conversions can be a viable tax planning strategy to leverage tax-free growth and withdrawals during retirement. Let’s say that your child’s Trump Account has a balance of $20,000 at the age of 18. Rolling these funds over to a Roth IRA will trigger taxes; however, going forward, the funds continue to grow tax-free. It’s important to note that Roth conversions will eliminate account separation, meaning normal IRA distribution rules and potential penalties for early withdrawals go into effect upon conversion.

Leveraging Other Accounts

The main advantages of Trump Accounts include free contributions from the government and donors, like the Dells, access to low-cost index funds, tax-deferred growth potential, and no earned income requirements. However, Trump Accounts might not be the best funding source for your child. Standard education savings accounts, like a 529 account, offer tax-free growth and distributions when funds are used for qualifying education expenses. Similarly, up to $30,000 of unused funds can be rolled into a Roth IRA. 529 plans can also lead to a state deduction on your income tax return for contributions, making it a viable alternative to consider.

If you are looking for more flexibility in fund use, opening a taxable brokerage account might also be a better use of your funds. Taxable brokerage accounts impose tax on dividends, interest, and capital gain income in the year it is received. However, taxable brokerage accounts in your child’s name can potentially exclude $1,350 of investment income from taxes. Funds within these accounts can be used for any purpose and don’t have any withdrawal penalties or restrictions. It’s like a savings account invested in the market. Working with a qualified financial advisor is the best way to determine which account investments are right for your child and situation.

Trump Accounts are a new section of the tax code designed to increase retirement savings in the next generation. The policing and regulating of Trump Accounts are still in their infancy, making it important to frequently check for updates or work with a qualified professional. KDG’s finance experts are here to answer your questions and get you on the right track to setting up your child’s financial future.