Trump Accounts: The New Child Savings Account Established Under the One Big Beautiful Bill Act

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA). The OBBA established a new type of tax-advantaged savings account for minors, known as “Trump Accounts.” While the specific details of this new program will need to be addressed with subsequent regulations and guidance, the following overview highlights the key terms and considerations relating to Trump Accounts. 

Key Terms of Trump Accounts: 

• Beginning January 1, 2026, Trump Accounts can be opened for the benefit of qualifying children. 
• Qualifying children must be: (1) minors when the Trump Account is opened; (2) U.S. citizens; and (3) the child’s parents (or parent filing income tax return where the child is claimed as a dependent) must have a U.S. social security number.
• For children born on or between January 1, 2025 and December 31, 2028, the federal government will provide an initial contribution of US$1,000 to each child’s Trump Account. 
• The Trump Account will essentially be a custodial trust account while the beneficiary is a minor. 
• No distributions are allowed until the beneficiary turns 18. 
• Once the beneficiary turns 18, the Trump Account will operate similar to any other Individual Retirement Account under IRC § 408(a). 

Considerations When Opening a Trump Account: 

• If you have an eligible child born between 2025 through 2028, you should certainly consider opening a Trump Account for that child, to take advantage of the US$1,000 initial government contribution. 
• If you have an eligible child born in 2025 through 2028, and you do not open a Trump Account for that eligible child, the federal government will open a Trump Account on that child’s behalf.
• If you have an eligible child who was not born between 2025 through 2028, you could still consider opening an account for that child, so as to take advantage of the tax-free growth for contributions to that account. 
• We are still waiting for additional details regarding which financial institutions will offer Trump Accounts. 
• The Trump Account will only be eligible to invest in a diversified fund that tracks a U.S. stock index. This is a major disadvantage from other savings accounts, such as 529 Accounts, which are not as restricted in their methods of investment. 

Considerations When Contributing to a Trump Account: 

• While the annual contributions are capped at US$5,000, the US$1,000 initial government contribution and certain exempt contributions from charitable organizations do not count towards the US$5,000 annual limit. 
• The US$5,000 annual contribution limit will be adjusted annually with inflation. 
• Qualified contributions to Trump Accounts are not included in the beneficiary’s gross income. 
• Any contributions to a Trump Account will count against your annual gift tax exclusion for the beneficiary of that Trump Account. If you already give you full annual gift tax exclusion to a 529 Account (i.e., US$19,000 per donee in 2025), then any gifts to the Trump Account for the same beneficiary would be in excess of your annual gift tax exclusion and would be subject to gift tax to the extent you do not have any remaining estate, gift and GST exclusion to offset the taxable gift. 
• Employers can contribute up to US$2,500 (adjusted annually with inflation) to a Trump Account established for the benefit of their employee or a dependent of their employee (please note, there is ambiguity as to whether this is a one-time or annual contribution exclusion). 
• Contributions by employers are not included in the employee’s gross income. 

Considerations When Withdrawing from a Trump Account: 

• No withdrawals are allowed from a Trump Account before the beneficiary turns 18. 
• Once the beneficiary turns 18, the Trump Account will be treated the same as an IRA for purposes of withdrawals. 
• Like any other IRA, early withdrawals (i.e., those taken before age 59.5) may incur a 10% penalty, in addition to the applicable income taxes. 
• As with any other IRA, certain early withdrawals, such as for a first-time home purchase, qualified educational expense, disability, certain medical expenses, et al., are not subject to any early withdrawal penalty. 
• Regardless of when withdrawn, withdrawals from the Trump Account will also be subject to income tax if withdrawn. 

Ultimately, whether a Trump Account is the appropriate tax planning strategy for your minor dependents depends on the specifics of your estate and tax planning. Please consult with your tax professional to weigh the pros and cons of a Trump Account, versus alternative saving strategies. 

For more information on the OBBBA, please click here.  

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