New federal legislation has introduced a long term savings vehicle for children, commonly referred to as “Trump Accounts.” Parents can sign up children for the account now and start contributing in July 2026, when the program is scheduled to launch. The goal is to give children a head start on investing by putting money to work early and allowing time and compounded growth to build meaningful long-term savings.
Under the program, any U.S. citizen under age 18 with a valid Social Security number will be eligible for a Trump Account. Children born between January 1, 2025 and December 31, 2028 may also qualify for a one time $1,000 federal contribution. To establish the account and receive the federal seed amount, a parent or guardian will need to make an election through the government portal or by filing IRS Form 4547, typically as part of the tax filing process. Current guidance indicates that the Treasury may establish accounts on behalf of eligible children if no election is made, though final procedures are still being defined. Parents, family members, and even employers will be able to contribute additional funds each year, up to $5,000 annually.
Unlike some other savings vehicles, these additional contributions are not tax deductible. However, the assets inside the account grow on a tax deferred basis, and distributions are generally taxable when they are eventually withdrawn. During the early years, investments are expected to be limited to low cost index funds that track broad U.S. equity markets. This structure is intended to keep the accounts simple, diversified, and focused on long term growth.
At its core, the idea behind the accounts is grounded in a principle investors know well: the time value of money. By investing early and letting capital compound, even modest contributions can grow over time into meaningful balances.
Families considering additional contributions beyond the initial $1,000 federal contribution should be aware of an important tax detail. Under current law, contributions to a Trump Account may require the filing of a federal gift tax return, known as Form 709. Because the child cannot access the funds until age 18, the contribution may be classified as a gift of future interest. Gifts of this type do not qualify for the standard annual gift tax exclusion and instead count against the contributor’s lifetime estate and gift tax exemption.
It is important to note that the IRS has not yet issued final guidance on this treatment. Future rulemaking or legislative adjustments could change how these contributions are handled. Until more clarity is provided, families should consult with their tax advisor to understand how the rules may apply to their specific situation.
From a planning perspective, Trump Accounts are best viewed as one potential tool within a broader financial strategy rather than a replacement for existing options. Many families already use 529 education savings plans, custodial accounts, or other investment vehicles to support long term goals. Each account type serves a different purpose, and thoughtful planning often involves coordinating several tools.
As the July 2026 launch approaches, additional details and guidance will continue to emerge. Please don’t hesitate to reach out to our team with any questions.
This content is for informational purposes only and should not be construed as investment, legal, or tax advice. Alesco Advisors is not a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information.
This content is based on current tax laws and regulations at the time of publication, which are subject to change. The data and information contained herein have been obtained from sources believed to be reliable, but Alesco Advisors makes no representations or warranties as to their accuracy, timeliness, or completeness.