Recently, I met with senior staffers in DC from the Department of Treasury and the Internal Revenue Service to discuss the new Trump Accounts (IRC Sec 530A). The sessions were very informative and I want to share important information with you regarding these accounts.
The Working Families Tax Cuts provides for establishing a Trump Account on behalf of every eligible child for whom an election is made, generally by a legal guardian, parent, adult sibling or grandparent -in that order, and such child has not turned age 18 before the end of the calendar year in which the election is made. For example, if the child doesn’t have a legal guardian, then either parent of the child can make the election regardless of filing status. By making the election, the authorized individual is representing, under penalties of perjury, that he or she is authorized to open the initial Trump account for the child. For example, if an adult sibling is making the election, they would be representing that there was neither a legal guardian nor parent of the child available to make the election.
Contributions to Trump Accounts cannot be made before July 4, 2026. While others can contribute, only parents or guardians can actually open the account on behalf of the child. There are no income thresholds requirements for a parent or guardian to open the account. Unlike traditional IRAs, you are also not required to have earned income in order to contribute to the account. In fact, if the minor has earned income, they can still contribute to a traditional or Roth IRA without any contribution overlap from the Trump Account.
Additionally, the federal government will make a one-time $1,000 pilot program contribution to the Trump Account of each eligible child for whom an election is made. An eligible child is one who is a U.S. citizen and who is born on or after Jan. 1, 2025, through Dec. 31, 2028. This contribution will be immediately invested in an index fund. To claim this investment, most families need merely check a box on Form 4547. The accounts are tax-deferred, so money grows without being taxed until it’s withdrawn. Distributions from the account cannot be made until the year that the child turns 18 years old. Once that takes place, the account transitions to traditional IRA rules, with distributions taxed as ordinary income. Premature distributions made prior to age 59 ½ come with additional penalties, with certain exceptions.
IRS issued Notice 2025-68 which provides further guidance. According to the guidance, the Treasury Department will create the initial Trump account and place it with a financial institution. The Treasury Department will select one or more financial institutions to serve as the initial trustee/s of the Trump Accounts. While initial Trump Accounts will be concentrated in a few financial institutions, Trump accounts can be moved to another financial institution or nonbank trustee through the establishment of a rollover account. A rollover Trump account for an account beneficiary may be established only after the initial Trump account is created by the Treasury Department or its agent for the account beneficiary and only during the growth period of the account beneficiary. The rollover account must be funded by the full amount of the existing Trump account, which must be closed within a reasonable time after establishment of the rollover account. Per the IRS’ guidance, “[a] receiving trustee will be required to have procedures in place to confirm that the first contribution to the rollover Trump account is a qualified rollover contribution.”
Rollovers include significant reporting requirements. Under 530A(i)(2), the trustee of the rollover account must, within 30 calendar days, provide an electronic report to the Treasury Department or its agent. The Treasury is seeking comment on ways to reduce this burden through automatic reporting and a proposed reporting format. In addition, the original (transferring) trustee must provide a report to the receiving trustee identifying the account as a Trump account and providing information regarding the basis in the transferred Trump account and the contributions received by the transferring trustee for the calendar year in which the qualified rollover contribution occurs. No particular form or format would be recommended for these trustee-to-trustee reports.
The guidance discusses the concept of a “growth period” which is the time between when the account is initially funded and January 1 of the year the beneficiary turns 18. During the growth period, up to $5,000 may be added annually, with that amount receiving a cost-of-living adjustment after 2027. After the growth period, the Trump account is treated as an IRA for withdrawals and may be rolled over into an IRA or other eligible retirement account.
There is several other funding mechanisms associated with the Trump Accounts. Certain governmental entities and charities may also make qualified general contributions to Trump Accounts, if given to a qualified class of account beneficiaries. Several notable philanthropists, such as the Dell family, has pledged significant amounts of their own money to help fund Trump Accounts. The administration has been working closely with a number of governors to determine the best way states can work with the federal government to expand access to Trump Accounts to as many children as possible. Thus far, 20 states are considering topping up the accounts. State involvement can take many different forms: states can, for example, tie top-ups of Trump Accounts to completion of financial literacy courses. Or they can directly contribute to Trump Accounts at birth.
Other persons are also able to make contributions up to an aggregate limit of $5,000 per year. Contributions from individuals are NOT tax deductible. Furthermore, an employer may contribute to a Trump Account of the employee or the employee’s dependent up to $2,500 per year (which counts against the $5,000 annual limit) under an employer’s Trump Account contribution program, and the contribution will not count toward the employee’s taxable income. The annual contribution limits are indexed to inflation and will adjust starting after 2027.
The funds in Trump Accounts must be invested in certain mutual funds or exchange-traded funds that track the S&P 500 or another index of primarily American equities.
Amounts generally cannot be withdrawn from Trump Accounts before January 1st of the calendar year in which the child turns 18 years old. After that point, the account generally is treated as a traditional IRA and generally is subject to the same rules as other traditional IRAs. If the child passes away before age 18, the account is closed and liquidated. Either the account’s inheritor beneficiary or the deceased child (if their estate is the beneficiary) must recognize the fair market value of the account, less any basis, as taxable ordinary income. The account cannot be rolled over to a surviving sibling’s Trump Account.
Finally, contributing money to a Trump Account is a gift. More explicitly, it is considered a gift of a future interest which doesn’t qualify for the annual exclusion. To qualify for this annual exclusion, the gift must be of a present interest, i.e., a gift that the recipient can presently use or benefit from. A transfer to a 529 account is an exception to the present interest requirement. The Tax Code specifically states that contributions to a 529 account have no such present interest requirement, hence a donor’s transfer to a 529 account qualifies for the gift tax annual exclusion.
In its haste to adopt the Trump Account opportunity this past summer, Congress did not add a rule, consistent with the 529 contribution rule, that treats contributions to a Trump Account as satisfying the present interest requirement. Accordingly, a contribution to a Trump Account might not be viewed as having satisfied the Tax Code’s present interest requirement, which means that a donor’s contribution to a Trump Account will be viewed as a future interest and that contribution will use some of the donor’s lifetime gift tax exemption (or worse, cause a federal gift tax to be paid.) In my conversations with Treasury and IRS staffers, they are leaning toward the same conclusion. Unless there is a remedial statutory correction, the prospective donor to a Trump Account will need to consider the costs of preparing a gift tax return, which might outweigh the benefit of any contribution to the Trump Account.
As you can see, this is a very complex set of rules and regulations and is not intended to be a complete or detailed analysis. The staffers I met with candidly expressed how challenging it has been for them to create the implementable and operational mechanisms and tools to launch the Trump Accounts. For example, the Treasury Department is only authorized to disburse money to pay refunds, not gifts of seed money to Trump Accounts. They expect to issue further guidance in the coming months.
It’s possible my software may provide mechanisms for me to file the form with your tax return but I don’t know when that will be confirmed. Therefore, if you have eligible children, particularly a child born since January 1, 2025, I strongly encourage you to complete and file Form 4547 as soon as possible. I’ve attached it to this email. Save a copy and send it to me for my records. Beginning sometime in the middle of 2026, you should be able to file this form online. Click on this link to access instructions for the form:
https://www.irs.gov/pub/irs-pdf/i4547.pdf or trumpaccounts.gov. Please note that IRS may revise the instructions in the future.