Trump Accounts for Children

Trump Accounts for Children 

The “One Big Beautiful Bill Act” signed by President Trump on July 4, 2025, included provisions for a new kind of savings and investment vehicle, aimed at helping new parents save for their children’s futures.  These “Trump Accounts” have been discussed lately in the media, but not all details are currently known.  These accounts are likely to be available sometime in 2026, so if you are a new parent (or about to become one), it is a good time to start thinking about the potential of these accounts for your newest family member.

Trump accounts are for children born between January 1, 2025, and December 31, 2028.  The first contributions to the account can be made on or after July 4, 2026.  Once the account has been set up for the child, the US Government will make a one-time deposit of $1,000 into the account.* In addition, anyone can contribute to the account. Employers can also contribute to the accounts of their employees’ children. The annual limit will be $5,000, which may include up to $2,500 in employer contributions.  All funds must be invested in ETFs or mutual funds that track a US stock market index.  

The good news is that expat US citizens can open them for their children, but the child and at least one parent must have a Social Security Number.  The account must be opened with a US-based Financial Institution.  The exact institutions that will qualify are currently unknown.  

While your child could use withdrawals to fund their further education, the withdrawals from a Trump Account are not limited to educational expenses.  Funds may be withdrawn penalty-free for higher education, first home purchase (subject to limits), or small business or farm expenses.  Funds within the account are generally not eligible for withdrawal until the child reaches the age of 18.  

One of the most important things to consider when setting up a Trump Account for your child is how the withdrawals will be taxed. Contributions made with after-tax dollars by individuals will be tax-free when withdrawn, while employer and government contributions are tax-deferred, just as the earnings and the growth in the account.  Early withdrawals are subject to penalties.  After the child reaches the age of 18, the account functions similarly to an IRA, with withdrawals taxed at ordinary income rates.  Withdrawals that do not meet the account’s specifics under the age of 59 ½ are considered non-qualified and attract a 10% penalty.

There is uncertainty regarding many details of the Trump Accounts.  For example, at this time, there is no guidance regarding how the funds will impact eligibility for financial aid for higher education.  Importantly, there is currently no guidance on which institutions will be able to open and administer these accounts.  More details are expected early in 2026.  Be sure to check back into the Kid’s Corner then for an update on these new accounts.

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*Parents may open Trump Accounts for children born before January 1, 2025 who are under the age of 18; however these accounts will not receive the $1,000 government contribution.

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