OBBBA Deep Dive - Part 5: Trump Accounts For Children
The One Big Beautiful Bill Act (OBBBA) didn’t just reshape deductions and marginal tax calculations — it also quietly introduced an entirely new savings vehicle aimed at children: Trump Accounts.
At first glance, Trump Accounts sound straightforward: a tax-advantaged account for children, seeded with a federal contribution and designed to grow over time. But as with many OBBBA provisions, the real story lies in the details. These accounts combine elements of retirement plans, custodial accounts, and education savings — with a unique set of restrictions that make thoughtful planning essential.
That’s why Part 5 of the OBBBA Deep Dive focuses on Trump Accounts: what they are, how they work, and when they may — or may not — fit into a family’s broader financial plan.
What Are Trump Accounts?
Trump Accounts are tax-advantaged investment accounts established for eligible children, created as part of a federal pilot program under OBBBA. For qualifying children, the government will make a one-time $1,000 contribution, intended to jump-start long-term savings.
Eligibility is limited. The child must be a U.S. citizen and born between January 1, 2024 and December 31, 2028, and an election must be made on the child’s behalf to establish the account. Government contributions are expected to begin funding in 2026.
Unlike traditional custodial accounts, Trump Accounts are highly structured. They are designed to remain invested for many years, with limited access until adulthood and strict rules around how funds are invested and distributed.
How Contributions and Investments Work
After the initial government contribution, additional funding can come from several sources, including parents, employers, and certain qualified organizations. Family contributions are capped annually (currently $5,000 per year, indexed for inflation), and contributions generally cannot begin until mid-2026.
Investment flexibility is also limited. Trump Accounts must be invested in approved options designed to track broad market exposure. Holding cash or money market funds is generally restricted to short-term purposes.
“Trump Accounts are built for discipline, not flexibility — which can be either a strength or a limitation, depending on your goals.”
This structure encourages long-term growth but leaves little room for customization, tactical investing, or short-term needs.
Distribution Rules: Long-Term by Design
Trump Accounts are intentionally difficult to access early. In most cases, distributions cannot occur until the beneficiary reaches age 18, and even then, withdrawals are subject to specific rules.
Once distributions begin, amounts are generally taxable to the beneficiary. Over time, the account begins to resemble a traditional IRA in both taxation and penalty structure, particularly for non-qualified withdrawals.
If the beneficiary passes away during the growth period, the account is treated similarly to a traditional IRA, with the account value included in taxable income.
“This is not a ‘college account’ or a ‘first-home fund’ — it’s a delayed-access savings vehicle with retirement-style rules.”
How Trump Accounts Fit — or Don’t — With Existing Tools
One of the most important planning questions is how Trump Accounts interact with tools families already use, such as 529 plans, custodial brokerage accounts, and eventually Roth IRAs.
Trump Accounts do not replace these options. Instead, they sit alongside them — often with more restrictions and less flexibility. For families who value control over timing, use, and tax treatment, that distinction matters.
In some cases, the federal seed contribution may be attractive. In others, existing strategies may provide better outcomes with fewer constraints.
Planning Considerations for Families
Trump Accounts may make sense in narrow circumstances, particularly for families focused on very long-term, adult-stage wealth building rather than education or near-term goals. But they also introduce additional complexity into an already crowded savings landscape.
Before opening one, families should consider:
- Whether delayed access aligns with their intentions
- How future taxation compares to Roth-based strategies
- Whether adding another account meaningfully improves outcomes or simply adds administrative burden
“Good planning isn’t about using every available tool — it’s about choosing the right ones.”
The Bottom Line
Trump Accounts are a notable addition under OBBBA, but they are not a universal solution. While the government contribution is appealing, the long holding period, investment restrictions, and eventual tax treatment mean these accounts won’t fit every family’s plan.
As with many OBBBA changes, the value of Trump Accounts depends on coordination — with education planning, tax strategy, estate goals, and long-term cash-flow needs.
If you’d like help evaluating whether Trump Accounts belong in your family’s strategy — or whether other tools provide greater flexibility and control — I’m here to help you think it through thoughtfully and proactively.
