Trump accounts have been all over the news since they were announced in 2025. But what are they, and how do they work? Many people have been understandably confused. Now that accounts are live as of July 4, 2026, we have clearer answers, though the rules are more complex than they may first appear.

At a high level, a Trump account is a tax-advantaged account for children under age 18, designed primarily for long-term retirement savings. These accounts are unique and should not be confused with 529 plans, UTMA accounts, brokerage accounts, or checking accounts.

A few key features define them:

• No earned income requirement to contribute
• Annual contribution limit of $5,000 per child
• Long-term focus, with no access during childhood
• Governed by rules similar to an IRA after age 18

Opening an Account

A child’s legal guardian opens the account using new IRS Form 4547, which can be submitted with a tax return or electronically via trumpaccounts.gov. After submission, the U.S. Treasury establishes the account and assigns a custodian, who will contact you to complete setup. Once established, the account can be transferred to another eligible custodian, most likely including firms like Fidelity, Schwab, or Vanguard.

The Growth Period (Birth to Age 17)

From birth through age 17, the account is in what’s called the “growth period.” Contributions are capped at $5,000 annually, and distributions are generally not allowed during this time.

Funding can come from several sources. The most notable is the Pilot Program, which provides a one-time $1,000 contribution for eligible U.S. citizens born between January 1, 2025, and December 31, 2028. This contribution does not count toward the annual limit, is not taxable, and does not create basis.

Individuals can also contribute after-tax dollars, which are the only contributions that create basis in the account. Employers may contribute up to $2,500 per year per employee; these contributions count toward the $5,000 limit but are treated as pre-tax and do not create basis. In addition, certain government or organizational contributions can be made for defined groups (not specific individuals), and these do not count toward income, annual limits, or basis.

Rollovers are limited. Only transfers between Trump accounts are allowed, must be trustee-to-trustee, and must include the entire account balance. Each child may have only one Trump account at a time.

Investment Limitations

Investment options are intentionally restricted to keep costs low and encourage long-term growth. Accounts must be invested in passive mutual funds or ETFs that track broad U.S. equity indexes, such as the S&P 500. Sector-specific funds, cash holdings, and money market funds are not permitted. All investments must maintain fees at or below 0.10%.

After Age 18: Transition to IRA Rules

Once the child turns 18, they take full control of the account. At this stage, the account transitions to rules that largely mirror those of a Traditional IRA. Contributions and distributions follow standard IRA guidelines, but with an important distinction: the account’s basis is tracked separately from other IRAs. Basis is part of the calculation in determining what is taxable and what is tax-free when funds are withdrawn after age 59.5.

Required Minimum Distributions (RMDs)

Trump accounts are included when calculating total IRA RMD obligations. However, any distributions taken from the Trump account are calculated using only that account’s balance and basis, not combined with other IRAs.

What We Still Don’t Know

There are still a few open questions as additional guidance is expected:

• How Trump accounts will be treated for FAFSA and financial aid calculations
• State income tax treatment
• Whether the 0.10% fee cap applies only to investment expenses or also to advisory and custodial fees

Trump accounts introduce a new way to save for a child’s future, but they come with unique rules and planning considerations. It is important to keep in mind the purpose of that savings. These accounts are largely geared toward setting a child up with retirement funds. These likely are not the best accounts for college savings, or for purchase of their first home, which is why it is important to think through which savings vehicle might be best for you and your family.

The Trust Company continues to monitor updates as more guidance becomes available. If you have a child under 18, or one eligible for the Pilot Program, reach out to your advisor to discuss whether this strategy may be appropriate for your family.