Between the headlines about the One Big Beautiful Bill Act and Michael Dell’s $6.25 billion donation, many have been asking whether these new accounts should be opened for children or grandchildren. Below is a straightforward look at how the accounts work and where they may fit into a broader wealth transfer plan.
A Trump Account is a government-seeded investment account intended to give eligible children a financial starting point. A high-level overview is below:
- The federal government will deposit $1,000 for every U.S. citizen child born between January 1, 2025, and December 31, 2028. Parents or guardians of any child with a valid Social Security number may open an account.
- Through a partnership with the Michael and Susan Dell Foundation, approximately 25 million eligible children – including those currently under age 10 who live in low-income zip codes and are not eligible for the $1,000 deposit– will receive $250.
- Parents, grandparents, and others may contribute up to $5,000 annually in total per child.
- Funds remain locked until the child turns 18. At that point, the account functions much like a traditional IRA. If the young adult does not need the funds immediately, they can roll it into their own IRA.
- To establish a Trump Account for the 2026 calendar year, parents or guardians will need to file IRS Form 4547, Trump Account Election(s) (once finalized). This can be submitted at any time – including when filing the 2025 tax return – or through an online tool expected to be available in July 2026.
- Custodians will need time to prepare and are not currently set up for Trump accounts.
Accepting the initial contributions from the government and Dell is a practical decision. It requires minimal effort, and the funds can compound for 18 years. The more nuanced question is whether additional contributions make sense. Here, tax treatment becomes important. Unlike 529 plans, where qualified withdrawals are entirely tax-free, Trump Account earnings are taxed as ordinary income. That may lead to unexpected tax consequences for a young adult who does not anticipate it. The 10% early withdrawal penalty can be waived for specific qualified purposes, such as a traditional IRA, including higher education expenses or the purchase of a first home.
The $5,000 annual contribution cap is also modest. It is not large enough to meaningfully influence estate tax planning and is too limited to cover the rising cost of higher education. The age-18 restriction adds another layer of rigidity. While it prevents early misuse, it lacks the flexibility and long-term control available through a trust. Some critics have also noted that the Social Security number requirement may exclude the most vulnerable children.
For most families, the Trump Account will be a supplemental tool rather than a cornerstone planning vehicle. A 529 plan remains the most efficient way to save for education, offering higher contribution limits and truly tax-free growth. Another powerful option is paying tuition directly to an educational institution because it’s an unlimited transfer that does not affect the annual exclusion or lifetime exemption. And for broader, long-term flexibility – whether the goal is education, housing, or general support – a trust still offers the greatest control.
In short, take the government’s $1,000 and the Dell Foundation’s $250 and let them grow. But for meaningful multigenerational planning, proven strategies like 529s, direct tuition payments, and trusts remain far more effective. Please reach out to your wealth manager with questions.
Weekly Commentary
Should I Open a Trump Account for My Child?
Mallon FitzPatrick
Between the headlines about the One Big Beautiful Bill Act and Michael Dell’s $6.25 billion donation, many have been asking whether these new accounts should be opened for children or grandchildren. Below is a straightforward look at how the accounts work and where they may fit into a broader wealth transfer plan.
A Trump Account is a government-seeded investment account intended to give eligible children a financial starting point. A high-level overview is below:
Accepting the initial contributions from the government and Dell is a practical decision. It requires minimal effort, and the funds can compound for 18 years. The more nuanced question is whether additional contributions make sense. Here, tax treatment becomes important. Unlike 529 plans, where qualified withdrawals are entirely tax-free, Trump Account earnings are taxed as ordinary income. That may lead to unexpected tax consequences for a young adult who does not anticipate it. The 10% early withdrawal penalty can be waived for specific qualified purposes, such as a traditional IRA, including higher education expenses or the purchase of a first home.
The $5,000 annual contribution cap is also modest. It is not large enough to meaningfully influence estate tax planning and is too limited to cover the rising cost of higher education. The age-18 restriction adds another layer of rigidity. While it prevents early misuse, it lacks the flexibility and long-term control available through a trust. Some critics have also noted that the Social Security number requirement may exclude the most vulnerable children.
For most families, the Trump Account will be a supplemental tool rather than a cornerstone planning vehicle. A 529 plan remains the most efficient way to save for education, offering higher contribution limits and truly tax-free growth. Another powerful option is paying tuition directly to an educational institution because it’s an unlimited transfer that does not affect the annual exclusion or lifetime exemption. And for broader, long-term flexibility – whether the goal is education, housing, or general support – a trust still offers the greatest control.
In short, take the government’s $1,000 and the Dell Foundation’s $250 and let them grow. But for meaningful multigenerational planning, proven strategies like 529s, direct tuition payments, and trusts remain far more effective. Please reach out to your wealth manager with questions.
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