You may have seen news coverage of the new "Trump accounts" for children, which were created under the 2025 tax law. Some clients have asked us whether these accounts make sense for their families, so we wanted to give you an overview of how they work and who stands to benefit most.

These accounts were enacted in 2025 as a new tax-favored savings vehicle for children under age 18. In general, they work somewhat like a traditional IRA before the child turns 18, but with special rules. Contributions are not deductible, growth is tax-deferred, and investment options are limited to certain low-cost mutual funds or ETFs that track broad U.S. stock indexes.

A Trump account can generally be established for a child who has not reached age 18 and who has a qualifying Social Security number. Annual contributions are generally limited to $5,000 per child, with inflation adjustments beginning after 2027. Contributions generally cannot be made before July 4, 2026.

For children born after December 31, 2024, and before January 1, 2029, there may also be a one-time $1,000 government contribution if the child is a U.S. citizen and the required election is made.

In most cases, distributions cannot be taken before the year the child turns 18, except for limited situations such as certain rollovers, excess contribution corrections, and special death-related rules. After age 18, the account is generally treated much like a traditional IRA, subject to special coordination rules.

These accounts may be most appealing for families with children born in 2025 through 2028 because of the potential $1,000 government contribution. However, they are generally not a replacement for 529 plans or other education-focused savings strategies.

Please contact us for more information on this if you have any questions or would like to get started setting up an account for your child or grandchild.