Trump accounts will officially launch on July 4, 2026, and we want to walk you through what they are, who qualifies, how to open one, how they work, the tax rules, and how they stack up against a 529 plan.What is a Trump Account?A Trump Account is a brand-new, federally created, tax-deferred investment account for children under 18. It was created by the One Big Beautiful Bill Act, signed into law on July 4th, 2025. Think of it like a custodial IRA for kids: owned by the child and managed by a parent or guardian until they turn 18. Who are Trump Accounts for?Any U.S. citizen under 18 with a Social Security number is eligible. There are three ways your child could receive a seed deposit to get started: Number one: If your child was born between January 1, 2025, and December 31, 2028, the federal government deposits a free $1,000 into the account. Number two: If your child is 10 or younger, was born before January 1, 2025, and lives in a ZIP code with a median income below $150,000, they may qualify for a $250 gift from the Michael & Susan Dell Foundation. The Dellshave pledged $6.25 billion to fund up to 25 million children. Number three: Other charitable deposits are emerging. For example, Dalio Philanthropies has pledged $250 for eligible children in Connecticut. More organizations may follow. If your child doesn't qualify for any seed deposit, they can still have a Trump Account, built from ground zero. How do You Sign Up for a Trump Account?To open an account, you will file IRS Form 4547 either with your 2025 tax return or anytime before the account is needed. You can also register online at TrumpAccounts.gov starting in mid-2026. All accounts are initially created and held with the U.S. Treasury's designated financial agent, BNY Mellon. Later, you'll be able to roll the balance over to your preferred brokerage. The election must be made before January 1st of the year your child turns 18. How do Trump Accounts Work?Once the account is open: Parents, grandparents, family, and friends can contribute up to $5,000 per year, total, across all contributors. That government seed money does NOT count against this limit. A great benefit that many people miss is that your employer can contribute up to $2,500 per year toward your child's Trump Account. That money is not considered taxable income to you or your child. It does count toward the $5,000 annual cap, though. No earned income is required, unlike a custodial IRA. You can start contributing the day your child is born. All funds must be invested in low-cost, broad U.S. equity index funds (think S&P 500-style ETFs) with no leverage and expense ratios capped at 0.1%. No sector funds, no international funds, no bonds, no cash during the growth period. No withdrawals before age 18. Period. Once your child turns 18, they take full control, and the account converts to a traditional IRA, subject to standard IRA withdrawal rules. What is the Tax Treatment of Trump Accounts?Contributions from family members are made with after-tax dollars, meaning they are NOT tax-deductible. However, those contributions do create basis, meaning you won't be double-taxed on the amount you put in. Government and charitable seed deposits do not create basis. Employer contributions are not taxable income to the employee or the child, but they also do not create basis. Growth inside the account is tax-deferred, meaning no taxes while it grows. But when your child withdraws the money, distributions are taxed as ordinary income, not at the lower capital gains rate. Early withdrawals after age 18 for non-qualified purposes are subject to a 10% penalty, just like a traditional IRA, unless used for approved expenses like college tuition or a first home purchase. How does a Trump Account Differ from a 529 Plan?So, how does a Trump Account compare to a 529 plan? Here's the breakdown: On tax treatment: 529 growth is completely tax-free when used for education. Trump Account growth is only tax-deferred — you'll owe ordinary income taxes at withdrawal. Advantage: 529. On flexibility: 529s are education-focused, though the rules have expanded. Trump Accounts can be used for a first home, career training, retirement, or education once the child turns 18. Advantage: Trump Account. On contribution limits: 529s have no strict annual federal limit. Trump Accounts are capped at $5,000 per year. Advantage: 529. On investment options: 529s offer broad menus — stocks, bonds, age-based portfolios. Trump Accounts are U.S. index funds only. Advantage: 529. On financial aid impact: A 529 owned by a parent is assessed at a lower rate on the FAFSA. A Trump Account is in the child's name and will likely be assessed as a student asset — potentially reducing need-based aid more significantly. Advantage: 529. On control: With a 529, the parent stays in control indefinitely. With a Trump Account, your child takes full ownership at 18 — which means a five or six-figure sum could be in the hands of a teenager. That's something every parent needs to think carefully about. One more thing worth noting — qualified dividends and long-term capital gains in Trump Accounts are taxed at ordinary income rates when withdrawn. In a UTMA or custodial account, those same gains would be taxed at the lower capital gains rate. That's a meaningful difference. What is our Recommendation?If your child, grandchild, or someone you know qualifies for the $1,000 government seed or the $250 Dell gift, there is no financial downside to opening the account, even if you never add another dollar. It's free money. But beyond the seed funding, whether you should actively contribute depends on your goals, your tax situation, and your comfort with your child controlling the funds at 18. My recommendation? Don't treat this as either/or. For most families, a Trump Account and a 529 plan can work together — one for flexibility and long-term wealth, one for tax-free education savings. Because Trump Accounts are brand new, there's still some uncertainty around state tax treatment and financial aid impact, we recommend you reach out to us and we'll build a strategy that makes sense for your family. | 
