Trump accounts, formally known as Section 530A accounts, are one of the more interesting pieces of the One Big Beautiful Bill Act that passed in 2025. They’ve been getting a lot of attention, and for good reason. A new tax-advantaged account for children that starts with a free $1,000 from the federal government is worth understanding.
That said, there’s a lot of detail buried in how these accounts actually work, who can open one, how they compare to what you already have, and where they fit in a broader wealth transfer strategy. This article walks through all of it.
What a Trump Account Actually Is
A Trump account is essentially a starter IRA for a minor child. It can be opened any time from birth through the end of the year before the child turns 18, a period the law calls the growth period. During that time, no withdrawals are allowed, contributions are limited to $5,000 per year, and investments are restricted to low-cost U.S. equity index funds. When the child turns 18, the account automatically converts to a traditional IRA in their name, subject to standard IRA rules going forward.
The key distinction from a regular IRA is that the child doesn’t need earned income to have an account. A parent can open one for a newborn. That’s what makes the account genuinely unique.
Who Can Open One
The IRS has a specific priority order for who’s allowed to open a Trump account on a child’s behalf: a legal guardian first, then a parent, then an adult sibling, then a grandparent. In most families that means a parent opens the account. Grandparents and other relatives can contribute to an account that’s already open, but they generally can’t open one themselves unless no parent or guardian is available.
If the child was born between 2025 and 2028 and qualifies for the $1,000 federal pilot contribution, the account must be opened by whoever claims the child as a qualifying child on their tax return in order to receive it.
How to Open One
Right now, Robinhood is the only institution that can open and hold a new Trump account. It was designated as the Treasury’s financial agent for the program alongside Bank of New York Mellon. Other custodians including Fidelity, Vanguard, and Schwab have said they intend to support rollovers in the future, but as of this writing none are accepting them yet, and that capability isn’t expected before 2027 at the earliest.
Opening the account is a two-step process. First, you file IRS Form 4547, either as part of your tax return, through the Trump Accounts app, or through the IRS website. Once that’s accepted, you’ll receive an email invitation to activate the account at trumpaccount.com, where you verify your identity and complete setup.
One gap worth knowing: there’s currently no option to name a successor beneficiary. If a child passes away before turning 18, the account loses its tax-deferred status and the value, minus after-tax contributions, becomes taxable income on the child’s final return.
The Free $1,000
Children born between January 1, 2025 and December 31, 2028 qualify for a one-time $1,000 pilot program contribution from the U.S. Treasury. It doesn’t count against the $5,000 annual limit, there’s no income requirement, and there’s no application fee. If your child or grandchild was born in that window, opening the account is worth doing for this alone.
How Contributions Work
The annual limit is $5,000 total across all contributors, including parents, grandparents, other relatives, and employers. Employer contributions have some added flexibility: up to $2,500 of the $5,000 can come from the employer of the child or the child’s parent, and employers can allow contributions through a Section 125 cafeteria plan.
A few contribution sources sit outside the $5,000 cap entirely, including the $1,000 government pilot contribution and qualified charitable or government contributions.
Individual contributions aren’t tax-deductible. If contributions push the account over the $5,000 limit, the excess automatically flows into a separate custodial account, similar to a UTMA, and is taxed under standard custodial account rules. This is easy to lose track of if multiple family members are contributing, so it’s worth coordinating.
The Gift Tax Question
Since Trump account funds can’t be touched until the child turns 18, there was an early question about whether contributions from grandparents and relatives would qualify for the annual gift tax exclusion, which generally requires the recipient to have immediate access to the gift.
Ahead of the July 4th launch, the IRS addressed this with Revenue Procedure 2026-25. As long as a contributor’s total gifts to a particular child, including Trump account contributions, stay within the $19,000 annual exclusion, there’s no gift tax return required and no lifetime exemption used. For most grandparents contributing to a grandchild’s account, this means no extra paperwork.
What It’s Invested In
During the growth period, the account can only hold low-cost U.S. equity index funds. Right now contributions default to an S&P 500 index ETF with a 0.02% expense ratio. The Treasury has indicated that a broader menu will eventually include funds tracking the S&P 1500 and the total U.S. stock market. The practical difference between the options is whether you want large-cap-only exposure or a broader slice that includes mid and small-cap U.S. stocks. Historically the performance difference has been fairly modest.
Trump Account vs. 529 Plan: How They Compare
This is the question most families actually want answered, and the short version is that they serve different purposes.
A 529 plan is built for education. Money grows tax-free and comes out tax-free for qualified education expenses. Under SECURE 2.0, up to $35,000 of unused 529 funds can roll into a Roth IRA for the beneficiary, provided the account has been open at least 15 years and the child has earned income. If education savings is the primary goal, the 529 is still the stronger tool.
A Trump account is built for retirement. Contributions go in after tax, so they come back out tax-free. Only the $1,000 government contribution and the account’s growth are taxable. Here’s where it gets interesting: if your child converts the account to a Roth IRA at 18, when they typically have little to no income, much of that taxable portion can be absorbed by the standard deduction. Depending on the child’s situation, the tax on conversion could be close to zero. Then you’ve got potentially 60 or more years of tax-free compounding ahead of them.
A custodial account, UGMA or UTMA, offers more flexibility than either. There are no investment restrictions, no lockup period until 18, and the money can be used for anything that benefits the child. What it doesn’t offer is the tax-deferred growth of a Trump account.
For higher-net-worth families who have already funded a 529, a Trump account can also be a way to continue gifting to a child without adding unearned income that triggers the kiddie tax the way a larger custodial account might.
What Happens at 18
The transition doesn’t happen exactly on the birthday. Robinhood’s account agreement describes a restricted period running from January 1 of the year the child turns 18 until their actual birthday. During that window, no contributions, distributions, or rollovers are permitted and the growth period investment rules stay in place. Once the birthday arrives, the account converts to a traditional IRA in the child’s name.
Because individual contributions were made with after-tax dollars, part of any future distribution will be tax-free based on the account’s cost basis. The custodian tracks that basis during the growth period, but once the account converts to a traditional IRA, the responsibility for tracking it shifts to the account owner, the same way it does for any traditional IRA.
Can You Transfer It to Another Custodian?
Not yet. Robinhood is currently the only institution that can hold a Trump account. A child can only have one at a time, so any future transfer would move the full balance. The earliest other custodians are expected to accept rollovers is sometime in 2027.
How This Fits Into a Broader Gifting Strategy
For grandparents who want to help build a grandchild’s long-term financial future, a Trump account is a straightforward, low-cost option with a meaningful gift tax safe harbor. But it works best as a complement to other tools, not a replacement for them.
The right combination depends on your estate plan, your gifting goals, and what accounts you’re already using. For most families, the sensible sequence is to claim the free $1,000 first, keep the 529 funded if education is a priority, and then decide whether additional dollars belong in the Trump account based on the child’s specific situation and your overall gifting picture.
These decisions connect directly to estate planning and broader intergenerational wealth transfer strategy, which is something we work through with clients as part of comprehensive retirement and financial planning. If you’re wondering how a Trump account fits into what you already have in place, that’s exactly the kind of conversation worth having before you start contributing. You can schedule a call here.
Key Takeaways
- Trump accounts are Section 530A accounts, a new tax-advantaged retirement savings account for children that converts to a traditional IRA at age 18.
- Children born between 2025 and 2028 receive a free $1,000 from the U.S. Treasury. Claiming it requires opening the account through Robinhood, which is currently the only institution that offers them.
- The annual contribution limit is $5,000 across all contributors. Individual contributions aren’t tax-deductible, and excess contributions automatically flow into a separate custodial account.
- The IRS gift tax safe harbor means most grandparents can contribute without filing a gift tax return, as long as total gifts to the child stay within the $19,000 annual exclusion.
- A Trump account tends to make the most sense alongside a 529 plan, not instead of one. If education savings are already on track, the Trump account offers a long runway of tax-deferred compounding toward retirement.
- Investment options during the growth period are limited to low-cost U.S. equity index funds. The account can’t be transferred to another custodian until at least 2027.
About the Author
Gabriel Motta, CFP®, MBA, is the founder and principal of Inclinevest LLC, a fee-only fiduciary retirement financial advisor and financial planner based in Greenwood Village, Colorado. He works with pre-retirees and retirees throughout south Denver, across Colorado, and nationally, including clients in Highlands Ranch, Centennial, Lone Tree, Aurora, Parker, Castle Rock, and Littleton. As a retirement planner and wealth manager, Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more at inclinevest.com or schedule a conversation.
Sources
- “An Advisor’s Guide To Opening 530A ‘Trump’ Accounts,” Kitces.com — https://www.kitces.com/blog/trump-account-opening-advisors-guide-530a-contributions-pilot-program-robinhood-how-to-open-rollover-investments-ira-ta/
- “Why Taxable Custodial Accounts Are Better Than ‘Trump Accounts’ For Kids’ Savings,” Kitces.com — https://www.kitces.com/blog/taxable-accounts-custodial-kiddie-tax-obbba-trump-accounts-one-big-beautiful-act-roth-rmd-529-plan/
- “Proposed regulations: Guidance regarding Trump accounts and contribution pilot program,” IRS/Treasury (REG-117270-25, REG-117002-25) — https://www.govinfo.gov/content/pkg/FR-2026-03-09/pdf/2026-04534.pdf
- “Trump Accounts: Long-Term Investing for the Next Generation,” Robinhood Learn — https://learn.robinhood.com/articles/trump-accounts/
- “What to know about the new Trump accounts,” Vanguard Perspectives — https://workplace.vanguard.com/insights-and-research/perspective/what-to-know-about-the-new-trump-accounts.html
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
