New “Trump Accounts” for Children: What Families Should Know

Written by David Newman, JD LMC Tax & Legal Manager

Following our July article, Understanding the New $1,000 Savings Accounts for Children, this update highlights recent developments and additional guidance.

A new tax-advantaged savings vehicle for children has been introduced under recent legislation. Known as “Trump Accounts”, these accounts were created under the One Big Beautiful Bill Act and are intended to encourage early investing and long-term wealth accumulation beginning at birth. Although Trump Accounts were created in 2025, contributions generally cannot be made until July 4, 2026.

The U.S. Department of the Treasury and the Internal Revenue Service have recently issued proposed regulations (REG‑117270‑25 and REG‑117002‑25) outlining how the accounts will operate and how taxpayers can establish them. While final guidance is still pending, the proposed rules provide important insight into how this new program will work.

Below is an overview of the key features and considerations for families.

What Are Trump Accounts?

Trump Accounts are tax-advantaged investment accounts established for children under age 18. The accounts are designed to support long-term savings for goals such as education, home purchases, business formation, or retirement. Each child may have only one Trump Account, and the account must be opened by a parent, legal guardian, or another eligible individual under IRS ordering rules. Contributions can generally be made to the account until the beneficiary reaches age 18.

Government Seed Contribution

One of the most notable aspects of the program is a federal pilot initiative providing an initial contribution for certain newborns.  Under the proposed regulations, the U.S. Treasury may deposit $1,000 into a Trump Account for eligible children born during the pilot period, provided the required election is made and an account has been established.

To qualify, the child must generally:

• Be a U.S. citizen
• Have a valid Social Security number
• Be born between January 1, 2025, and December 31, 2028

This initial contribution is intended to encourage early participation and give families a financial head start.

Annual Contribution Limits and Who Can Contribute

Families and other eligible contributors may make annual after-tax contributions of up to $5,000 per child, and during the growth period, total non-exempt contributions are limited to $5,000 per year. Certain contributions, including the Treasury pilot contribution and some rollover or other exempt contributions, are not counted toward this annual limit.

Potential contributors may include:

• Parents or guardians
• Grandparents and other relatives
• In certain circumstances, employers of the child’s parents

Beginning July 4, 2026, employers may make these contributions, and they count toward the $5,000 annual limit. The legislation also allows employers to contribute up to $2,500 per year per employee’s child, which may be treated as a tax-deductible business expense and a tax-free fringe benefit to the employee.

Investment Requirements

The proposed rules limit investment choices to qualified mutual funds or exchange-traded funds (ETFs) that track broad U.S. equity indices. These investments must meet additional IRS requirements, including restrictions such as no leverage and limits on fees. This restriction is intended to encourage long-term, diversified investment approaches rather than speculative investments.

Withdrawal Rules

Funds in Trump Accounts are designed to remain invested during the child’s formative years. In general:

• Withdrawals are generally restricted during the growth period, which ends on December 31 of the year before the beneficiary turns 18
• Beginning January 1 of the year the beneficiary turns 18, the account is expected to function similarly to a traditional individual retirement account
• Distributions may be taxable as ordinary income
• Early withdrawals may be subject to additional tax penalties unless an exception applies

Establishing an Account

The proposed regulations indicate that taxpayers will establish Trump Accounts by filing a new IRS election form when opening the account through an approved financial institution.

Because the rules governing Trump Accounts are still evolving, additional regulatory guidance is expected from the IRS in the coming months. LMC will continue monitoring developments and provide updates as further guidance becomes available. If you have questions about how Trump Accounts may fit into your family’s financial or tax planning strategy, please reach out to your LMC advisor for guidance tailored to your needs.