What Grandparents and Parents Should Know About Trump Accounts

By Mike McCarthy, CPA/PFS, CFP®

Last year, Trump Accounts made the news along with the One Big Beautiful Bill Act (OBBBA). These new accounts were designed to help families build wealth for their children and grandchildren. Accounts for children born between January 1, 2025, and December 31, 2028, come with $1,000 in “seed money” from the federal government.

If you’re a parent or grandparent looking to support the next generation, these accounts may offer you a new way to do so. Here’s what you need to know.

How Does a Trump Account Work?

Also called Section 530A accounts, as they were created under Section 530A of the OBBBA, these accounts are a new type of savings account for children. They help children get a head start on saving for retirement. Funds in the account grow tax-deferred, and when the child turns 18, it converts to a traditional IRA.

Currently, these accounts must be opened via a mobile phone application. The verification process is also a bit lengthy, but we hope that custodians like Charles Schwab and Fidelity will have account opening and custody options soon.

The IRS established certain guardrails to keep each account diversified and keep maintenance fees low. Until December 31 of the year the child turns 17, a few key rules apply:

• Funds must be in exchange-traded funds (ETFs) or mutual funds.
• Those ETFs and mutual funds must track an index of mostly United States companies.
• Management fees can’t be more than 0.1% per year.
• Investments can’t use leverage.

After this period, the same investment rules that govern traditional IRAs apply.

Funds may not be withdrawn from the account until the child turns 18. Earnings, but not original contributions, are taxed as ordinary income.

How to Open an Account and Claim a $1,000 Deposit

The easiest way to create a Trump Account is to visit TrumpAccounts.gov. Alternatively, you may fill out and submit IRS Form 4547. You can open an account for any child who is under 18 through the end of the calendar year and has a valid Social Security number.

To receive the $1,000 federal deposit, the child must also meet these criteria:

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

If your child or your grandchild qualifies for the $1,000 pilot deposit, note that this money isn’t automatically added once you create the account. When you create an account in the TrumpAccounts.gov portal or fill out Form 4547, there’s a box you need to check to opt into the program. If you don’t opt into the $1,000 pilot program, the account opens with $0.

How Can You Contribute to Your Child or Grandchild’s Account?

While a Trump Account may help your child or grandchild build wealth over time, there is a limit to how much can be contributed each year. Each child may receive up to $5,000 per year in total. That amount includes contributions from family members and employers.

The $5,000 limit is indexed to inflation, and beginning in 2028, it starts to adjust. Notably, any contributions you make to a child’s Trump Account are with after-tax dollars, and they aren’t tax-deductible.

It’s important to note that Trump Accounts may only be opened by the legal guardian of the minor and only one account per minor can be opened.

How a Trump Account Compares to a 529 Plan

Many families who ask me about Trump Accounts are already contributing to a 529 plan for the same child. So the useful question isn’t whether to open one. It’s where the next dollar does the most good.

The two accounts were built for different jobs. A 529 plan is designed for education. A Trump Account is designed to give a child a very long runway toward retirement, and the tax treatment follows from that.

 

	Trump Account	529 Plan
Built for	Long-term savings that becomes a retirement account	Education costs
Federal seed money	$1,000 for children born 2025 through 2028	None
Annual limit	$5,000 from all sources combined	Governed by gift tax rules, currently $19,000 per year per giver
Maryland tax deduction	None	Up to $2,500 per beneficiary per year, with carryforward
Tax on growth	Ordinary income when withdrawn	No tax when used for qualified education expenses
Access before 18	Not permitted	Available for qualified expenses at any age
At 18	Becomes a traditional IRA the child controls	Can be redirected to another beneficiary or rolled to a Roth IRA

Putting Both to Work

For most families, both accounts can have a place. The question is which one gets funded first.

Claim the $1,000 before anything else. It costs a form and nothing more, and the seed deposit doesn’t count against the $5,000 annual contribution limit, so it doesn’t take anything away from what your family can add.

After that, look at where your own money goes. If the goal is college, the 529 plan generally comes out ahead on taxes, on the Maryland deduction, and on what happens if plans change. If the grandchild has earned income from a summer job, a custodial Roth IRA can beat both, because that growth comes out tax-free in retirement rather than being taxed as ordinary income.

If a parent’s employer offers to contribute to a Trump account, take it. Employers can put in up to $2,500 a year without it counting as taxable income to the employee. That amount does count toward the same $5,000 cap, so the family needs to compare notes before three people start writing checks to the same account.

Looking for Help Setting Up Your Family’s Trump Accounts?

A Trump Account can help kick-start the process of saving and investing. However, if you don’t know what steps to take, your child or grandchild could very easily miss out on the free $1,000 in seed money.

Financial Consulate is here to help its clients address important financial questions like these with clear, fee-only fiduciary advice. If you have questions about opening a Trump Account for a family member, or if you’d like a second set of eyes to help you explore other tax or financial planning strategies, get in touch with us. You can reach our team at (410) 823-7283, or you can schedule a time to talk at your convenience through our website.

Frequently Asked Questions About Trump Accounts

What is a Trump Account, and who qualifies for the $1,000 government contribution?

A Trump Account (also called a Section 530A account) is a tax-deferred savings account created to help children build long-term wealth. Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with valid Social Security numbers, may qualify for a $1,000 federal seed contribution. Families must opt into the pilot program when opening the account, or the government contribution will not be deposited.

How do I open a Trump Account for my child or grandchild?

You can open a Trump Account through the official government portal or by submitting the required IRS form. Because eligibility rules, contribution limits, and enrollment requirements can affect whether your child receives the $1,000 government deposit, many families work with the Financial Consulate team to confirm the account is set up correctly and fits into their broader financial and education planning strategy. Important note, only the legal guardian of a minor can open a Trump account and only one account may be opened per minor.

Is a 529 plan better than a Trump Account for college savings in Maryland?

For education costs, a 529 plan is usually the stronger choice, because withdrawals for qualified education expenses come out untaxed and Maryland taxpayers can subtract contributions from state income. A Trump Account serves a different purpose. Depending on your goals, a 529 plan, Roth IRA strategy, custodial account, or other investment vehicle may also deserve consideration. Financial Consulate helps parents and grandparents compare these options and build a plan that supports both their child’s future and their family’s overall financial goals.

About Mike 

Michael McCarthy, CPA/PFS, CFP®, is the President and CEO of Financial Consulate, a wealth advisor specializing in tax, estate, and retirement planning for small business owners and entrepreneurs.