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Trump Accounts - July 2026

The New "Trump Accounts": What Parents Need to Know (and The Catch)

By Kit Lancaster, CFP®

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In July of 2026 a new account is coming to market.  The U.S. Treasury opens the doors on a brand new savings account designed specifically for children: the "Trump Account."

We've already received a few questions from clients asking, "Is this real?" "Is it just for the super wealthy?" "How do I open an account?" And I expect that number to grow exponentially once families realize there's free money on the table.

As financial planners, we live for the details. We want to know how this fits into your cashflow, your long term financial capacity, and your goals. So, I dove into the IRS and Treasury Department guidance. We also have new analysis coming out of the planning community to give you the plain English version before July arrives.

Here is the bottom line: Grab the free money, but be very careful before you add your own.

Let's break it down.

What Exactly Is a "Trump Account"?

Think of it as a government sponsored "Investment Account" kinda like a Traditional IRA.

Officially established under the One Big Beautiful Bill Act (yes, that is the real name), a Trump Account is a tax deferred investment account designed to build wealth for the next generation of American kids.

The headline feature? "Seed Money."

If you have a child or grandchild born between January 1, 2025, and December 31, 2028, the U.S. Treasury will deposit a one time $1,000 "seed" contribution into their account. That is straight up free money to get the compounding snowball rolling.

If you have kids born prior to this time window, you can open an account for your child, but they will not qualify for seed money.  

How Do They Work?

Unlike a 529 plan which is specific to education, the Trump Account is a bit more broad, but it comes with strict guardrails.

  • Investment Strategy: You generally can't pick individual stocks. The funds are typically invested in low cost index funds tracking American companies (like the S&P 500).

  • Contribution Limits: You (parents, grandparents, friends, relatives) can contribute up to $5,000 per year total per child.

  • The "Growth Period": The money is locked up until the child turns 18.

  • Tax Treatment: It grows tax deferred. When they turn 18, it functions largely like a Traditional IRA.

Who Qualifies?

  • Income Limits? None. Whether you make $50,000 or $5,000,000, your child or grandchild is eligible.

  • Citizenship? The child needs a valid Social Security Number.

  • Age? The $1,000 seed is for the 2025 through 2028 cohort, but accounts can generally be opened for children under 18.

How Do You Open One?

This is where you need to be patient. You cannot open one today, but you need to act soon.

  1. File Your 2025 Taxes: You will need to make an election on the new IRS Form 4547 ("Trump Account Election") when you file your taxes in early 2026.

  2. Mark Your Calendar: The accounts officially "go live" and open for contributions on July 4, 2026.

  3. The Website: The Treasury has set up TrumpAccounts.gov where the portal will eventually live.

Kit's Take: The "Free Money" Strategy

Here is where the financial planning rubber meets the road. Should you use this account?

Step 1: Take the Free Money.

If you have a qualifying child or grandchild (born 2025 through 2028), absolutely open the account to get the $1,000 government grant. You should never walk away from a free $1,000. That's a gift that will grow for decades.

Step 2: PAUSE before adding your own money.

While the tax deferral sounds nice, recent analysis from leading financial planning experts suggests these accounts might actually be a tax trap compared to other options.

Here is why:

When your child eventually takes money out of a Trump Account, that money is taxed as Ordinary Income (the highest tax rates).

If you invested that same money in a standard Taxable Custodial Account (UTMA/UGMA) - which you may already be familiar with - 

  1. You can take advantage of the "Kiddie Tax" rules, which currently allow a child to realize about $2,700 of gains tax free every single year. Trump Accounts don't get this perk.

  2. When they eventually sell investments in a taxable account, they pay Capital Gains Tax rates, which are significantly lower than Ordinary Income rates.

The Verdict:

The Trump Account turns low tax capital gains into high tax ordinary income. It also locks up the money with less flexibility than a regular brokerage account.

My advice?

Open the account to get the government's $1,000. But for your own savings contributions, you are likely better off using a 529 Plan (for college) or a standard Taxable Custodial Account (for flexibility and better tax rates).

Confused about where to put your savings?

You aren't alone. Between 529s, UTMAs, Roth IRAs for kids, and now Trump Accounts, the "alphabet soup" of saving for children is getting thick.

For grandparents especially, you want to make sure you are using the right tools. You've worked hard to build wealth, and you want to pass it on wisely. 

Be sure to schedule a meeting to if you are interested in putting money to work for your children or grand children. 

We can provide the best ways to save and invest for children, breaking down the pros and cons of every account type so you can pick the right bucket for your family.

Click here to schedule a call with our team. Let's make sure you're ready when July arrives.

Resources & References

 

This article is intended for clients of Sterling Edge Financial.  The information, talking points, opinions and links provided are for informational purposes only and should not be considered advice.  

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