Under the One Big Beautiful Bill Act (OB3), we now have a new way to set aside money for kids: Trump Accounts.
First, let’s acknowledge that just the name of these is divisive. But in my personal and professional opinion, that shouldn’t matter. President Trump is also not the first politician to name something in the tax code after himself (Roth IRAs were named for a senator named William Roth, the Pease limitation was named after a congressman, etc.).
Regardless of what these accounts are named, these are just a savings vehicle for children. So let’s move past the name and analyze these in light of their features and the comparison to the other savings vehicles we have for our children.
There are five general ways money can go into a Trump account: 1) by you (or someone you know, like grandparents) as a personal gift, 2) by your employer, 3) by private mass donation, 4) by the initial pilot program from the government (currently for children born from 2025 to 2028), 5) or by rollover from other eligible accounts.
All growth in the accounts is tax deferred. Parent contributions are after-tax (creating basis), other contributions go in pre-tax. State tax rules may differ on this. These are new, we’re still figuring out the details of this.
The money can’t be touched until your child turns 18 when the account closes and becomes a regular pre-tax IRA. So when they start taking it out, whether at the age 18 or age 65, however much they take out will be income on their tax return. No limitations or restrictions on what it can be used for: pay for college, down payment on a house, backpacking across Europe.
How do these stack up compared to other savings vehicles for minors? These are the various factors in play that I see: taxes, tax filing requirements, college financial aid impact, restrictions on spending, and other restrictions like timing, age, and earned income.
Obviously, I care about taxes, but not just income and optimizing taxes, but also about whether certain situations trigger a requirement to file a tax return. Some situations create a surprise requirement for a child to file a tax return. Those two things are usually investment income over $1,350 (in 2026) or side hustle profits over $400.
I also care about financial aid eligibility. You or your children holding certain types of assets will reduce or disqualify aid you might have gotten for your kids attending school. Hiding assets is illegal, but strategically planning for the long-term how to accumulate and hold assets is legitimate, allowed, and strategic.
I personally watch out for limited purpose funds, only being able to use money in certain ways (e.g., for education) without tax consequences or additional penalties.
So how do Trump accounts stack up with those criteria?
Trump accounts are entirely pre-tax. Nothing would be taxable to the child in their minor years. But here’s your tax planning point: depending on the child’s work and income situation when they turn 18, they could likely do a Roth conversion of the whole amount and convert it at 0% or very low income tax rates to grow tax-free from that point on. That’s awesome!
That said, parents do not get a deduction for putting money into their own child’s account. Their employer would, if he or she gives you the employee benefit of depositing money into your child’s Trump Account.
Trump Accounts will not create a federal filing requirement for the child (California has not conformed, so these accounts currently appear to be taxable accounts in California). In its structural form, it’s a retirement account. You don’t (generally) have to file a tax return just because you put money into your retirement account. We still have a potential gap as to whether parents would need to file a gift tax return if parents contribute, but I’m personally hoping for a technical correction clearing that up.
Trump accounts should not impact financial aid eligibility as long as the money is left in a retirement account. Retirement assets get excluded from FAFSA (Free Application for Federal Student Aid) considerations
The money in Trump accounts can be used for anything the child wants once he or she reaches age 18. That could be a good or bad thing depending on that child’s goals and sense of deferred gratification. All the more reason to focus on teaching our kids deferred gratification!
Up to $5,000 per year can go into each child’s Trump Account per year. If your employer contributes money to your child’s account, that limit is $2,500 per employee, not per employee’s child.
And there is NO earned income requirement (i.e., your child does not have to have a job) to contribute to a Trump Account.
So then what are the other (main) types of accounts minors can hold?
Custodial accounts, UTMA, UGMA
These accounts have no contribution restrictions. Put as much money in there as you like. No tax deduction for you. But it’s a taxable account. If it banks up enough money to earn more than $1,350 of taxable investment income one year, your child may suddenly have a filing requirement. I have had a handful of clients get very annoyed over the years when I tell them that their 7-year-old needs to file a tax return. These accounts are also counted in the expected family contribution (EFC) for financial aid when you fill out a FAFSA.
529 plans
In my state of California, there is no tax benefit for depositing funds. Some other states give a modest tax break, but nothing at the IRS level. 529 plans will grow tax-free, but that growth only stays tax-free if the money is used for qualified purposes, mainly education. Recently, under SECURE Act 2.0, up to $35,000 can be contributed to a Roth IRA, subject to normal Roth contribution limits. These accounts also do reduce your qualification for outside financial aid.
IRAs – both pre-tax/traditional and Roth
The limit on both of these types of IRAs is that the child needs to have an earned income. So a legitimate job or a profitable side hustle, not chore money. The contribution limits on these are currently $7,500 per year (for tax year 2026). Since these are retirement accounts, they do not impact financial aid, and can be used for any purpose. They need to be left alone until age 59 and a half to avoid penalties, but Roth contributions and sometimes conversions can come out earlier tax- and penalty-free.
So what’s my recommendation?
Take the free money! Have the account open so that you can receive it if any free money comes: through the Pilot Program for babies, through private philanthropy like the Dell family contributions, or if your employer decides to make contributions.
Should you put any money in for your children? The old adage applies here: put your own oxygen mask on first. I strongly believe that parents should not be funding any accounts for children if the parents are not able to meet their monthly budget needs and are setting aside enough for their own retirement.
Then, if you are on track with your own financial targets and goals, and you want to give money to your child, I think these can be a great option.
What I really like is the trifecta 1) that these would not create a federal income tax filing requirement for minor children, 2) that there is no earned income requirement to contribute, and 3) that there are no restrictions on how the funds can be used. Trump Accounts fit in that space that none of the other current options for kid accounts offer.
So I’ve opened them for my kids. TBD on how much, if anything, I’ll deposit. You can do the same either through filing Form 4547 with your tax returns or by going to https://form.trumpaccounts.gov/.