You may have heard about a new child savings vehicle called a Trump Account, set to become available beginning July 4, 2026. For families with young children or grandchildren, this could become a meaningful piece of the long-term planning puzzle. As with any new opportunity, the real value comes from intentionality, not haste. Here's what we know so far, and how we'd encourage you to think about it. What is it? A Trump Account is a custodial, IRA-style account opened for a child under 18. The child owns it, but a parent or guardian manages it until adulthood. Contributions can begin July 4, 2026, and money is invested in low-cost U.S. index funds. Funds generally stay locked until the year the child turns 18, at which point the account converts into a traditional IRA. In effect, it's a head start on a lifetime of investing. The Opportunities A few features make these accounts worth paying attention to: Children born between 2025 and 2028 may receive a one-time $1,000 seed contribution from the government, an early down payment on decades of compounding. Parents, grandparents, and even employers can contribute, up to a combined $5,000 per year. And unlike a Roth IRA, there's no earned-income requirement, so the door is open from day one. Contributions aren't deductible, but growth is tax-deferred. The Real Prize: A Roth Conversion Window Once the account converts to a traditional IRA at 18, there may be a window, often several years, where a young adult has little to no earned income. That's a low-tax (sometimes near-zero-tax) opportunity to convert balances into a Roth IRA, paying tax only on the earnings portion, with no early-withdrawal penalty on the conversion itself. Done thoughtfully, this can reposition assets for decades of tax-free growth, turning an early seed into a genuinely generational asset. The Fine Print A few constraints worth knowing up front: funds are locked until 18, investment choices are limited to index funds, contributions aren't tax-deductible, and only one account is allowed per child, which makes family coordination essential. A Word for Grandparents Because many of you might be grandparents thinking about how to pass wealth to the next generation, we want to flag this clearly: while grandparents can contribute to a Trump Account, the rules around who can open one are stricter than most expect. Current IRS guidance puts parents and guardians first in line. Grandparents are last, and generally can't open an account if a parent or guardian is "available," a term the IRS hasn't yet defined for children born before 2025. Opening an account also requires certifying, under penalty of perjury, that you're authorized to do so. Not a step to take lightly or alone. Our recommendation: coordinate with the parents first. Don't open an account independently. Where This Fits Trump Accounts are best understood as one tool among several, a complement to 529 plans and other custodial structures, not a replacement. Their value won't come from simply opening one, but from how deliberately it's woven into the broader family plan. Since contributions to Trump Accounts are considered gifts, collaboration on funding other savings vehicles such as 529 plans or custodial accounts in a given year remains paramount. Below is a great guide that walks through several common ways parents save for children, highlighting the pros and cons of each option and why someone might consider one strategy over another. Savings Accounts for Children - 2026 For Now Take time to talk it through as a family. There's no need to rush. Additional IRS guidance is still coming, particularly on eligibility and ownership rules. For more information on Trump Accounts, visit: Trump Accounts. If you'd like to talk through how this might fit into your family's savings plan, please email us at clientservices@avodahadvisors.com. Sources: IRS guidance on Trump Accounts (irs.gov), Fidelity and Schwab learning centers, Investor.gov, Congressional Research Service report, Ed Slott's IRA Help (irahelp.com) |
"Trump Accounts" Coming July 4 — What Families Should Know
