Trump Accounts Explained: 5 Smart Ways to Save for Your Child’s Future

A new opportunity to invest in your child’s financial future is here—and understanding how to take advantage of it could make a meaningful difference over time.

Trump Accounts are a new type of tax-advantaged investment account designed to help families build long-term savings for children. With annual contributions, potential employer benefits, and government-funded incentives, these accounts offer another opportunity for parents and grandparents to begin planning for the next generation.

But before opening or funding an account, it's important to understand the rules, contribution limits, and potential tax implications.

Here are five important Trump Account tips to help your family make informed financial decisions.

1. Understand How Trump Accounts Work

Trump Accounts allow eligible children under age 18 to benefit from long-term investments that can grow over time.

Here are a few important features:

• Annual contribution limit: Families and other contributors can generally contribute a combined total of up to $5,000 per year, with inflation adjustments beginning after 2027.

• Investment requirements: During the account's initial growth period, funds generally must be invested in qualifying low-cost mutual funds or exchange-traded funds (ETFs) that track broad indexes of primarily U.S. companies.

• Withdrawal restrictions: Funds generally cannot be withdrawn before January 1 of the year the child turns 18, with limited exceptions.

• Tax treatment: Investment earnings generally grow tax-deferred, but withdrawals may be subject to income taxes and additional restrictions.

Unlike traditional savings accounts, Trump Accounts are designed for long-term investing rather than everyday expenses.

Tax Planning Tip: Starting early gives investments more time to potentially benefit from compound growth. However, investment returns are not guaranteed, and families should consider their overall financial goals before contributing.

2. Coordinate Who Manages Your Child's Account

Before establishing a Trump Account, families should understand who is authorized to act on the child's behalf.

The program generally recognizes a priority order that includes legal guardians, parents, adult siblings, and grandparents, subject to applicable requirements.

Recent Treasury rules also provide for automatic account enrollment for eligible children. As a result, some families may already have an account established and may need to claim or manage it rather than open a new one.

Financial Planning Tip: Coordinate with family members before making account elections or contributions. This can help prevent confusion, avoid duplicate requests, and ensure everyone understands how the account fits into the child's long-term savings plan.

3. Plan Ahead for What Happens at Age 18

One important consideration is what happens when your child reaches adulthood.

Beginning January 1 of the year the beneficiary turns 18, the special childhood growth-period restrictions end, and the account generally becomes subject to traditional IRA rules.

That does not mean the money must immediately be withdrawn.

Instead, the account may continue to support long-term financial goals, subject to applicable IRA requirements.

Withdrawals can have tax consequences, including potential early distribution penalties. Certain exceptions may apply, such as qualifying higher education expenses or first-time home purchases.

Tax Planning Tip: Consider how a Trump Account fits alongside other savings strategies, including 529 college savings plans and other investment accounts. Each has different tax advantages, withdrawal requirements, and financial planning benefits.

4. Don't Overlook Government, Employer, and Charitable Contributions

One of the most attractive features of Trump Accounts is the possibility of receiving contributions beyond what your family saves.

Several programs may help eligible children build their account balances.

A $1,000 Federal Contribution for Eligible Children

Children born between January 1, 2025, and December 31, 2028, may qualify for a one-time $1,000 federal contribution.

To qualify, the child must meet applicable requirements, including U.S. citizenship and Social Security number eligibility. An authorized individual must also complete the required election.

Employer Contributions of Up to $2,500 Annually

Employers may establish programs allowing contributions of up to $2,500 annually toward eligible Trump Accounts.

Qualifying employer contributions can be excluded from an employee's taxable wages, making this a potential benefit for both employees and businesses.

However, these employer contributions generally count toward the overall $5,000 annual contribution limit.

Additional Charitable Contributions

Private organizations and philanthropists may also provide contributions to eligible children's accounts.

For example, Michael and Susan Dell announced a multibillion-dollar initiative providing $250 contributions to millions of eligible children, with eligibility based on factors such as birth year and geographic location.

The program's eligibility requirements have evolved, so families should verify whether their children qualify rather than assume a contribution will be received.

Financial Planning Tip: Parents should review available incentives, while business owners may want to explore whether a Trump Account contribution program could complement their existing employee benefits.

5. Review Your Family's Savings Strategy Now

Whether you have a newborn, a young child, or a teenager approaching adulthood, now is a good time to evaluate how Trump Accounts fit into your family's financial future.

Consider these questions:

• Does your child already have a Trump Account?

• Is your child eligible for the $1,000 federal contribution or other incentives?

• Could your employer offer contributions as an employee benefit?

• How would a Trump Account complement your existing education and retirement savings plans?

• Have you considered the potential tax implications of future withdrawals?

The earlier you understand your options, the more opportunities you may have to develop a thoughtful, long-term financial strategy.

Make Your Child's Financial Future Part of Your Tax Planning Strategy

Building financial security for the next generation doesn't happen overnight. It starts with informed decisions, consistent planning, and understanding which opportunities may benefit your family.

Trump Accounts offer another way to approach long-term savings, but they're not a one-size-fits-all solution.

At Cohn, Lopez & Associates, we help individuals, families, and business owners navigate tax planning decisions and understand how changing tax laws may affect their financial goals.

Have questions about Trump Accounts or how they fit into your family's tax strategy?

Contact our team to discuss your options and make sure you're not overlooking valuable planning opportunities.

Call 407-960-3652 or schedule an appointment.