One of the features of the “One Big Beautiful Bill Act” that was signed into law last year establishes a “Trump Account” for every baby born between January 1, 2025, and December 31, 2028. Each account will be funded by the United States Government in the amount of $1,000. The program begins on July 4, 2026 (America’s 250th Birthday!)
Think of these accounts as your baby’s very first tax-advantaged investment account that gives them a head start to building long-term savings and growth from the time of birth. In addition to the $1,000 contribution from the federal government, parents, family members, friends, and even employers can make contributions to these accounts up to a maximum of $5,000. Trump accounts are tax-deferred accounts meaning no taxes are owed on the growth of the account over time as long as the funds remain in the account.
Who is Eligible and What is the Annual Limit of Contributions?
Eligibility is limited to (1) United States citizens that are (2) born between January 1, 2025, and December 31, 2028, and (3) have a valid social security number.
Each Trump Account is subject to a total maximum annual contribution limit of $5,000. Employers may contribute up to $2,500 per year (which is part of the annual $5,000 total contribution) to a Trump Account of any of their employees’ dependents. Parents, friends, and family members making contributions to a Trump Account should be careful to discuss contributions to the Account as the contributions may have to be reported to the IRS on a gift tax return (Form 709).
What Kind of Account is a Trump Account?
Trump Accounts are not bank accounts. Instead, eligible Trump Accounts are investment accounts in which the funds generally are invested in mutual funds or exchange traded funds that track an index of primarily United States companies.
The funds in Trump Accounts are similar to traditional IRA’s in that they grow on a tax-deferred basis. Children that have Trump Accounts are not taxed on contributions to the account, nor are they taxed on the growth and income of the funds in the account until the funds are withdrawn.
Parents wanting to take advantage of these new Trump Accounts must complete and file IRS Form 4547.
Can the Funds Be Withdrawn in Case of Emergency?
No. Funds in a Trump Account cannot be withdrawn until the child reaches the age of eighteen. Parents therefore should plan carefully when considering their options for saving funds for the future. However, a Trump Account can certainly serve as a piece of a larger estate plan for families looking to grow and preserve wealth for future generations. Do you have questions about Trump Accounts or other estate planning needs? Call the estate planning attorneys at Plakas Mannos.
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