Trump Accounts: A New Tool for Children and Grandchildren, But Not a Planning Panacea

The dawning of July 4, 2026 marked the 250th anniversary of our great country, and we hope everyone had a chance to celebrate and look forward to a prosperous future.

Much less celebrated on July 4, 2026, is the availability of a new savings account named IRC Section 530A Accounts (the tax code section governing them), better known as Trump Accounts.

New savings vehicles often generate significant attention, particularly when they are promoted to help future generations build wealth. The recently created Trump Account is no exception. Since the legislation was passed, we've received questions from clients, parents, and grandparents wondering whether Trump Accounts should become part of their family's planning strategy.

The answer, as is often the case in wealth planning, is it depends.

Trump Accounts introduce some interesting opportunities, particularly for families interested in long-term retirement savings for children. However, they also come with limitations, tax complexities, and practical tradeoffs that make them far less compelling than many of the headlines suggest. In our view, Trump Accounts are best viewed as another tool in the planning toolbox—not a replacement for existing strategies such as 529 plans, custodial Roth IRAs, UTMAs, or taxable investment accounts.

Created under the One Big Beautiful Bill Act (OBBBA), Trump Accounts are custodial retirement accounts designed for children. The account is established for a child and remains in a custodial structure until age 18 (or age of majority, depending on the state), at which point the beneficiary (the child) gains control of the account. During the years prior to age 18, no distributions are permitted.

The account functions similarly to a traditional IRA, but with one important distinction: it allows retirement-oriented savings to begin before a child has earned income. This is the primary planning problem Trump Accounts are attempting to solve. An older child/teenager with a job can contribute to a custodial Roth IRA because they have earned income. A newborn, toddler, or elementary school student without legitimate earned income, generally, cannot. Trump Accounts effectively create a retirement savings vehicle for children long before they enter the workforce.

The strongest argument for Trump Accounts has little to do with taxes and everything to do with the power of compounding. A critical investing principle is employed with these accounts: time in the market matters much more than timing the market. Every additional year of compounding has the potential to significantly increase future wealth.

A child who receives funding at birth may have decades of additional compounding compared with an investor who waits until adulthood to begin saving. The legislation also includes a pilot program that provides a $1,000 government contribution for eligible children born in the years 2025 through 2028, creating an additional incentive for some families to establish an account. For families focused on multigenerational wealth planning, the concept is attractive: create a modest account today, invest for the long term, and allow decades of growth to work in the child's favor.

Unfortunately, that is where the analysis becomes more complicated.

Trump Accounts can be funded from several sources, which creates a flexible savings vehicle for children. As noted above, eligible children born during the years 2025 through 2028 may receive a one-time $1,000 federal seed contribution, while parents, grandparents, and other individuals can make additional after-tax contributions of up to a total of $5,000 annually (indexed for inflation). Employers may also contribute up to $2,500 per year (per employee, not per child) without the contribution being taxable to the child. Unlike Roth IRAs, contributions are not dependent on the child's earned income, allowing families to begin funding an account from birth.

Some may initially assume Trump Accounts combine the advantages of a Roth IRA with the flexibility of a custodial account. They do not. In most cases, contributions will be made with after-tax dollars. However, unlike a Roth IRA, future growth is not distributed tax-free. Instead, investment growth is generally taxed as ordinary income when withdrawn. As a result, many Trump Accounts will have the following characteristics:

• Non-employer contributions are generally not tax-deductible.
• Employer contributions can be tax-deductible to the employer.
• Growth occurs on a tax-deferred basis.
• Earnings are typically taxed as ordinary income when distributed.
• Required minimum distributions eventually apply if assets remain in a traditional IRA structure.
• Beneficiaries may ultimately face large taxable balances later in life, absent thoughtful Roth conversion planning.

This creates a somewhat unusual, and unfortunate, outcome. Families contribute after tax dollars, then the child pays taxes again on investment growth decades later upon distribution. Compared with a Roth IRA, which offers after-tax contributions and tax-free qualified distributions, the tax treatment is considerably less attractive in our view.

Before opening any account, we encourage clients to answer a simple question: What are we trying to accomplish?

The answer often determines how to prioritize Trump Accounts, or whether to use them at all. Many discussions about Trump's Accounts focus on the account itself. The better approach is to start with the goal and then determine which account best supports that objective.

• Education: If the primary goal is education, a 529 plan will often remain the superior choice. 529 plans provide tax-free growth and tax-free withdrawals for qualified education expenses, which have been expanded over the years beyond college to include vocational school and private K-12 expenses. Parents maintain control of the account, beneficiaries can be changed (within limits) when circumstances change, and current rules permit limited Roth IRA rollovers for unused assets, up to a $35,000 lifetime limit. For many of our clients, education funding is a higher priority than retirement funding for a child or grandchild. In those cases, it is difficult to make a compelling argument that a Trump Account should displace a 529 plan, especially if the risk of “over-saving” in a 529 can be mitigated by the $35,000 Roth conversion option.
• Future Life Goals: Perhaps the objective is not education at all. Maybe parents want to help a child purchase a first home, start a business, fund a wedding, or provide financial flexibility during young adulthood. In those situations, a UTMA or taxable brokerage account may be the more appropriate tool. These accounts generally provide significantly greater flexibility and are not restricted to retirement-oriented use and the accompanying taxable distributions. That said, ownership of UTMAs transfers to the child at age 18 (or age of majority), so caution is warranted if this is a concern.
• Retirement: This is where Trump Accounts make their strongest case. If the specific goal is to seed a child's retirement portfolio as early as possible, Trump Accounts provide an opportunity that did not previously exist. They can bridge the years before a child becomes eligible to contribute to a custodial Roth IRA through earned income.

Importantly, this is not necessarily an either/or decision.

Many families may find that a Trump Account serves as an early-stage retirement vehicle, while a custodial Roth IRA becomes the preferred retirement savings account once a child begins working.

While the concept is straightforward, implementation can be more complicated. One consideration is that the beneficiary receives control of the account at age 18 (or age of majority). Some parents are comfortable with that outcome. Others are not. Unlike a 529 plan, where parents generally retain ongoing control, Trump Accounts are designed to become the child's asset. That may fit well with some family dynamics and less well with others.

There are also tax administration considerations. Because accounts may contain a combination of after-tax and pre-tax contributions, basis tracking may be required over many years. Future Roth conversions, distributions, and other transactions may create additional recordkeeping responsibilities. The accounts also require a degree of behavioral discipline. Their greatest benefit comes from leaving assets invested for decades. If the funds are ultimately used for near-term spending needs, much of the intended advantage disappears.

Despite the limitations, there are circumstances where a Trump Account may be worth considering. The strongest candidates are likely families who:

1. Have a child born in the years 2025 through 2028 and qualify for the $1,000 pilot contribution.
2. Intend the money exclusively for retirement purposes.
3. Have already addressed other priorities such as education funding.
4. Are comfortable transferring control to the child at age 18 (or the age of majority)
5. Value the ability to start retirement savings before the child has earned income.

In these situations, the account can serve a useful role within a broader planning strategy.

Trump Accounts introduce an interesting new planning option, but they are not the revolutionary wealth-building vehicle some early commentary may have suggested. For many families, 529 plans, custodial Roth IRAs, UTMAs, and traditional taxable investment accounts will continue to play the primary role in helping children and grandchildren build wealth. Those solutions are often simpler, more flexible, and better aligned with common family goals. That does not mean Trump Accounts lack value. Rather, their value appears most significant in a specific niche: providing a way to begin the retirement savings compounding before a child has earned income and potentially capturing the available government contribution for eligible children.

As with most planning decisions, the question is not whether a Trump Account is good or bad. The question is whether it is the right tool for the objective. The most successful planning strategies rarely rely on a single account type. More often, they involve combining multiple tools—each serving a specific purpose—to help families support education, retirement, financial flexibility, and long-term wealth transfer goals.