Listen to Shakespeare: Parents Should Consider Trump Accounts
- Patrick Phippen
- 7 days ago
- 4 min read
Shakespeare’s Romeo questioned: “What’s in a name? That which we call a rose / By any other name would smell as sweet.” Romeo and Juliet (Act II, Scene 2). We take this to mean that essence matters more than labels. So it is with the new Trump accounts. Whether or not these accounts make sense for your financial situation should not hinge on the “Trump” label attached to them. (I can tell similar stories about folks who loved the Affordable Care Act but criticized Obamacare, failing to realize they are one and the same.)
Trump accounts, outlined in the new section 530A of the Internal Revenue Code, are a feature of the large tax and spending bill signed into law last summer. As a special type of traditional IRA, the section 530A Trump accounts provide another option for parents looking to save for their child’s future. There are still myriad details to be ironed out, and IRS Notice 2025-68 provides some initial parameters, but here is a rundown of the basics:
Eligibility
A section 530A Trump account can be opened for any child with a Social Security number who is not yet 18 years old.
Contributions
A maximum of $5,000 per calendar year can be contributed to the section 530A Trump account, not including exempt contributions discussed below. These contributions create a basis in the account. Contributions that are exempt from this $5,000 annual limit do not add to the account basis.
Anyone can contribute funds to a particular section 530A Trump account. Similar to an employer 401(k) contribution, an employer may contribute up to $2,500 to a section 530A Trump account of an employee or their dependent without that amount being included in the taxable income of the employee.
Contributions to section 530A Trump accounts are not deductible by the contributor.
Unlike traditional and Roth IRAs, there is no income requirement tied to section 530A Trump accounts.
Contributions can be made beginning July 4, 2026 (one year after the enabling legislation was signed into law).
Exempt contributions
Rolling over funds from one section 530A Trump account to another does not count against the $5,000 annual contribution limit, provided that the entire account is rolled over and the beneficiary remains the same.
A “general contribution” made by a state or local government or a charitable organization likewise does not count against the $5,000 annual contribution limit.
Last year, Michael and Susan Dell announced a $6.25 billion charitable contribution towards section 530A Trump accounts. This donation will provide $250 to each section 530A Trump account for a child who is 10 or younger that lives in a zip code where the median income is under $150,000.
State and local governments and charitable organizations could make similar contributions specifying a class of beneficiaries.
Finally, a “section 6434 contribution” is not included in the $5,000 annual contribution limit. The new section 6434 of the Internal Revenue Code is where a lot of the buzz surrounding section 530A Trump accounts emanates. For every child born in 2025, 2026, or 2027 for whom a section 530A Trump account is opened, the government will deposit $1,000 into that account.
Distributions
No withdrawals are permitted from the section 530A Trump accounts before the calendar year in which the beneficiary turns 18 years old.
There are three exceptions to the no-distribution rule:
an entire-account rollover to another section 530A Trump account for the same beneficiary in a direct trustee-to-trustee transfer;
certain ABLE account rollovers; or
distributions due to the death of the account beneficiary.
Beginning with the calendar year in which the section 530A Trump account beneficiary turns 18, the account is treated like a traditional IRA that has a basis of nondeductible contributions. Withdrawals are subject to tax. A 10% early-distribution penalty will also apply to withdrawals before age 59.5 unless an exception applies (for example, first-time home purchase or higher education expenses).
Investments
Funds may only be invested in low-cost index funds that track the performance of the stock market as a whole.
Section 530A Trump accounts will initially be maintained at a brokerage selected by the U.S. Treasury. After government seed money is added (see the “exempt contributions” discussion above), parents of account beneficiaries will be able to roll the accounts over to a brokerage of their choosing.
Opening an account
Parents can open a section 530A Trump account for their children by filing IRS Form 4547 as part of their 2025 tax return or on a stand-alone basis via the trumpaccounts.gov website. The form can be filed now, and accounts will be opened beginning this July.
Should I open an account?
Whether opening a section 530A Trump account makes sense depends on individual circumstances. For instance, it is a great way to get kids who do not have earned income into an IRA; they could even strategically convert the funds to a Roth IRA beginning in the year they turn 18 with little or no tax. On the other hand, custodial investment accounts and section 529 education savings accounts also provide opportunities to save for a child’s future with fewer restrictions—and funds in a 529 account can even be converted to a Roth IRA under certain conditions thanks to the SECURE 2.0 Act.
My general recommendation is that custodial accounts and 529 plans are superior options, so a section 530A Trump account only makes sense if you are already maxing those out. However, if your child is eligible for either the $250 or $1,000 government seed money, go to trumpaccounts.gov and sign up for an account. Even if you never add additional funds to the account, it would be silly to pass up on free money and decades of compounding growth. As Romeo taught us, do not let the label make you miss out on free money.
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