Bryan P. Tracy, CFA, CFP^®, CLU^®, Vice President & Director of Portfolio Management
btracy@haverfordquality.com

Planning for the financial future of children and loved ones often involves evaluating a variety of savings and gifting strategies. Many individuals gravitate toward familiar vehicles such as 529 Plans and UTMA/UGMA custodial accounts, each of which offers distinct tax advantages and planning flexibility.

A newer option, introduced under the One Big Beautiful Bill Act (OBBBA), is the Trump Account, with contributions permitted beginning July 4, 2026. This account provides an additional approach to long-term, tax-advantaged savings intended to help families establish an early financial foundation for minors.

What is a Trump Account? 

A Trump Account is a newly introduced investment savings account designed for eligible children under the age of 18. Once the child reaches adulthood, the account transitions into an Individual Retirement Account (IRA). Its primary purpose is to encourage long-term saving and provide an early opportunity to accumulate wealth in a tax-deferred environment. While the account is held for the benefit of the child, it must be opened and managed by an authorized individual until the beneficiary reaches the age of 18.

To establish the account, the authorized individual must file IRS Form 4547 or complete the process through the designated online portal. The account is designed to function similarly to a traditional retirement account once the child reaches the age at which distributions are permitted.

Eligibility and Account Structure 

Eligibility for a Trump Account is limited to those who meet specific criteria. The child must be a U.S. citizen, possess a valid Social Security number, and be under the age of 18 as of December 31 of the year in which the account is opened. In addition, each child is permitted to have only one Trump Account.

The account must be opened by an IRS-defined authorized individual, with priority generally given to a legal guardian, followed by a parent, adult sibling, or grandparent.

Pilot Program Contribution

One of the more notable features of Trump Accounts is the availability of a $1,000 Pilot Program Contribution for eligible children. This provision is designed to encourage early participation and provide initial funding base for long-term growth. To qualify, the child must have been born between January 1, 2025, and December 31, 2028, and must be a qualifying child of the individual opening the account. The election to receive this contribution must be made at the time the account is established using IRS Form 4547.

Contribution and Withdrawal Considerations

Trump Accounts offer flexibility in how contributions may be made, while still maintaining defined annual limits. Up to $5,000 may be contributed each year, and funds can originate from a variety of sources, including family members, friends, and employers. There is no earned income requirement tied to contributions, while the child is under the age of 18. Employer contributions are permitted but are subject to a separate annual limit, and contributions from government entities or charitable organizations do not count toward the standard annual limits.

Distributions from Trump Accounts are generally restricted until January 1 of the calendar year in which the child turns 18. At that point, the account transitions to treatment similar to a Traditional IRA, and the beneficiary assumes control as the account owner. Distributions are subject to ordinary income tax, and early withdrawals may result in a 10% penalty unless an applicable exception applies. These exceptions may include certain education expenses, first-time home purchases within defined limits, qualifying medical costs, or specific life events such as disability or adoption.

Comparison of Other Savings Vehicles

Trump Accounts are one of several options for saving for children, and it's important to evaluate them alongside alternatives like 529 plans and UTMA/UGMA accounts.

529 Plans are specifically designed for education savings and offer tax-deferred growth with tax-free withdrawals when funds are used for qualified education expenses. This makes them particularly effective for families with a clear focus on funding future educational costs.

UTMA and UGMA custodial accounts offer flexibility, allowing funds to be used for a wide variety of purposes, provided they benefit the child. However, ownership of these accounts shifts entirely to the child once they reach the age of majority, which can reduce the ability to influence how the funds are used.

Trump Accounts occupy a middle ground, offering tax-deferred growth and structured withdrawal rules that extend beyond education, while still ultimately transferring ownership to the beneficiary at the age of 18.

Choosing the Appropriate Strategy

Selecting the most appropriate savings vehicle depends on several factors, including the intended use of the funds, preferred tax treatment, desired level of control, and broader financial and legacy goals. Some families may prioritize education-focused savings, while others may seek broader flexibility or long-term wealth accumulation strategies.

Given these considerations, there is rarely a one-size-fits-all solution. Instead, evaluating how each account type aligns with your specific goals is essential to developing a cohesive and effective plan.

Saving for children and loved ones involves balancing flexibility, tax efficiency, and long-term intent. The introduction of Trump Accounts adds another layer of opportunity, complementing established tools such as 529 Plans and custodial accounts. Thoughtful planning and careful evaluation of each option can help ensure that your strategy supports both your financial goals and the legacy you wish to create. Consider contacting your Wealth Planner to identify the most effective strategies based on your specific goals and circumstances.

If you'd like to learn more about education funding in greater detail, feel free to review our recent article here – Wealth Planning Resources: Funding for Education (UTMA) vs. 529 Plans | The Haverford Trust Company.

Trump Accounts – Jumpstarting the American Dream

Treasury, IRS issue proposed regulations on how to open initial Trump Accounts under the One, Big, Beautiful Bill | Internal Revenue Service

Instructions for Form 4547 (12/2025) | Internal Revenue Service

What to Know About Trump Accounts | Charles Schwab

Trump Accounts: Overview and Policy Considerations | Congress.gov | Library of Congress

What are Trump Accounts and how do you open one? | Fidelity

The information provided is not intended to be and should not be construed as legal or tax advice or a legal opinion. Haverford does not provide legal or tax advice. You should contact your legal or tax advisor regarding your specific tax situation prior to taking any action based upon this information.