The One Big Beautiful Bill Act of 2025 introduced a new type of savings vehicle for children—commonly referred to as Trump Accounts (TA).

These accounts are designed to encourage long-term investment for children and include a $1,000 federal seed contribution, along with tax-deferred growth. Before opening a TA, account sponsors should understand how these accounts work, who qualifies, how contributions are taxed, and how they compare to other options such as 529 Plans, UTMAs, and Roth IRAs.

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What is a TA?

A TA is essentially an IRA with unique rules that apply especially to the period before the beneficiary turns 18 (years known as the account’s “growth period”). During the growth period, the account can be invested and includes an annual contribution limit that is separate from other IRAs (generally, $5,000). Unlike other IRAs, TAs do not require the account beneficiary to have earned income in order to make a contribution. On December 31 of the year before the beneficiary turns 18, most special rules expire, and then the TA operates under traditional IRA rules.

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Who can be a beneficiary of a TA?

TAs can be established only for an “eligible individual.” The law defines an eligible individual as anyone who is a U.S. citizen with a Social Security number, who will not turn 18 before the end of the calendar year, and who has had a TA established at the election of an adult (known as an “authorized individual”). To encourage families to open these accounts, the U.S. government will provide a $1,000 “pilot program” contribution to the TA of any U.S. citizen who has a U.S. Social Security number and was born any time from January 1, 2025, through December 31, 2028. A minor born before 2025 may also be a TA owner/beneficiary, as long as he or she lives with the taxpayer creating the account for more than half the year and does not provide more than half of his or her own support. An eligible child can have no more than one TA.

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Who can contribute to a TA?

Individuals, such as parents and grandparents, and employers can collectively make an overall annual contribution that does not exceed $5,000 per account, with no more than $2,500 coming from the employer. (An employer would have to allow, under its benefits plan, for contributions to be made to this type of savings vehicle.) Contributions by parents, grandparents and other individuals are nondeductible, regardless of the taxpayer’s income.

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One important observation regarding contributions by individuals: under the current law, individual contributions do not qualify for the annual gift tax exclusion ($19,000 in 2026, per donor, per donee); nor do they qualify for the generation-skipping transfer (GST) tax exemption (for gifts by donors more than one generation older than the beneficiary). Absent further guidance, donors would be required to use their lifetime gift and/or GST tax exclusion amount and file an annual gift tax return, even if no gift or GST tax is due.

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What is an “eligible investment” for TAs?

During the growth period, TAs may invest only in “eligible investments.” These include any U.S. mutual fund or exchange traded fund (ETF) that tracks a “qualified index,” does not use leverage, does not have annual fees and expenses of more than 0.1% of the balance of the investment in the fund and meets any other criteria designated by the U.S. Treasury or the IRS

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How Do Trump Accounts Compare to 529 Plans, UTMAs, and Roth IRAs?

In the case of UTMA (Uniform Transfers to Minors Act) accounts, the custodian, parent or grandparent controls the account. They can use the funds while the child is a minor in ways which benefit the child. When the child reaches the statutory age, usually between 18 and 21, the beneficiary takes ownership of the account and has the right to withdraw funds. The beneficiary may spend these funds at their entire discretion. A similar control question arises with Trump Accounts, as the beneficiary will have control of the account once they turn age 18. In contrast, with a 529 account, there is no age at which the beneficiary takes control of that account.

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From a taxation standpoint, distributions from TAs will be taxed at ordinary income levels. By contrast, qualified distributions from 529 Plans and Roth IRAs will be tax free.

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How to Open a Trump Account

If you want to open one for your child, you’ll need to file IRS Form 4547. You cannot open a Trump Account without filing Form 4547 or registering through the upcoming online portal at trumpaccounts.gov. The form is free to file and can be submitted electronically with your tax return or mailed separately.

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Only an “authorized individual” can file Form 4547 on behalf of a child. The IRS defines authorized individuals differently depending on which election you’re making.

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If only opening an account (no pilot contribution):

An authorized individual is a legal guardian, parent, adult sibling, or grandparent of the child, in that order of priority. If the child has a legal guardian, only the guardian can file. If no guardian exists, either parent can file regardless of filing status.

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If claiming the $1,000 pilot contribution:

To claim the $1,000 federal contribution, you need to be claiming the child as your qualifying child on your taxes for the year you file. For most parents, this is straightforward — if your child lives with you and you’re claiming them as a dependent, you qualify. You don’t need to have already filed your 2025 return; you just need to plan to claim the child.

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By signing Form 4547, you’re certifying under penalties of perjury that you’re authorized to open the account.

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Trump Account Custodians/Managers

The Treasury has designated The Bank of New York Mellon Corporation (“BNY”) as a financial agent of the U.S. government to support implementation of the Trump Accounts program. BNY will manage the initial accounts and help develop the new Trump Accounts app. As part of this process, BNY has partnered with Robinhood, which will serve as brokerage and initial trustee for Trump Accounts.

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