by: Keenan Call, Director, Family Office Services
Introduction
A Trump Account is a new, child‑focused IRA category created by the One Big Beautiful Bill Act to promote long‑term savings for minors. Key features include a one‑time, $1,000 federal pilot seed for qualifying newborns; a limited, low‑cost investment menu; and distinct contribution categories with different tax and reporting consequences. Because distributions from these accounts are restricted during childhood, they encourage forced savings and provide an opportunity to combine financial education with long‑term wealth building. Employers and charities can also use Trump Accounts for employee benefits and community programs.
Planning Considerations for Families
Trump Accounts can be an effective, long‑term gifting vehicle, but private contributions are taxable gifts and should be used intentionally. They are most advantageous for families that (a) want to begin or replace a partial annual‑exclusion gifting program, (b) have lifetime gift and estate exemption to use, or (c) can rely primarily on non‑taxable pilot, state/charity or employer funding. Key considerations:
- Consider gifting in conjunction with existing estate and gift strategies in place as private contributions are taxable gifts and count against annual exclusion and lifetime exemption.
- For 2026 and 2027, private contributions are capped at $5,000 annually (indexed thereafter), per account.
- For those with a gifting strategy to maximize annual exclusion gifting in place, the Trump Account should be compared to existing planning strategies to determine if the tax-deferred growth in a Trump Account is a benefit worth incorporating.
- For those who wish to gift to children and grandchildren, either through annual exclusion or lifetime gifting, but who otherwise do not have a strategy in place, the Trump Account is an option to consider.
- Prefer non‑taxable funding (federal pilot, state or charitable programs) or employer contributions when available; these increase account value without using family exemption dollars.
- Coordinate with Achieving a Better Life Experience (ABLE) planning, if applicable. An ABLE rollover is permitted in the year the beneficiary turns 17; careful planning is needed to avoid unintentionally foreclosing options.
- By default, Trump Accounts are set up as individual accounts governed by the Trump Account rules (not as trust-owned assets). As such, they usually sit outside a family’s existing trust structure and therefore are not automatically subject to the control, distribution rules or creditor/estate protections a trust can provide.
- If the beneficiary dies during the growth period (prior to age 18), the account ceases to be a Trump Account and the assets are treated as distributed on the date of death, with important tax consequences for heirs.
- If used for other purposes, consider involving the beneficiary at a young age and use the account as a built-in financial education platform to teach age-appropriate lessons (saving versus spending, basic investing and how different contribution sources affect tax basis) and establish staged decision milestones so the beneficiary develops financial skills as the assets grow.
Planning Considerations for Employers and Business Owners
Trump Accounts can be offered as an employee benefit (similar to a retirement match). Early guidance envisions a $2,500 annual employer contribution cap for 2026–2027 (indexed thereafter); Payroll, tax and Trump Account plan design issues differ from traditional retirement plans and should be vetted with counsel. Administration requires verifying dependent eligibility, identifying the responsible adult and ensuring contributions go to the permitted, low‑cost investment options. Companies can also partner with philanthropic or state programs to scale impact.
Eligibility, Account Opening and Timing:
A child is eligible only if:
- They are under age 18 at the end of the calendar year the election is made;
- They have a Social Security number issued before the election is filed; and
- A valid election to open the account is filed
For an eligible child, opening a Trump Account requires a formal election (IRS Form 4547 or an online tool). Priority to file follows a strict order: legal guardian, parent, adult sibling, grandparent. The filer becomes the “responsible party” and controls operational choices during the growth period, including custodian and investment selection and whether to request custodian‑to‑custodian transfers.
Form 4547 was released in early 2026, and an online election tool is expected in mid‑2026. An election can be filed any time before January 1 of the year the child turns 18. No contributions are permitted before July 4, 2026.
Investment Options and the Account Custodian’s Role
Account custodians will offer a limited, low-cost, index-focused investment menu and must monitor funds during the growth period. The responsible party chooses among the custodian’s eligible investments. Custodians also have reporting duties: enforcing contribution limits, reporting custodian-to-custodian rollovers and following the special reporting regime the statute contemplates.
Contributions to a Trump Account
There are five contribution types, each treated differently for tax and recordkeeping. Only contributions from other individuals create basis, which reduces taxable income on later distributions. Federal, state, charitable and employer funding generally do not create basis, meaning those amounts would be fully taxable on distribution.
Understanding the different sources of contributions and careful recordkeeping are central to planning.
- Contributions from family, friends and/or other individuals
- For 2026 and 2027, contributions are capped at $5,000 annually (indexed thereafter) per account.
- Gifts from parents, grandparents, the beneficiary or other private donors are the only contributions that create basis in the account.
- Pilot program contribution (federal seed)
- A one-time, $1,000 payment for qualifying newborns born between January 1, 2025, and December 31, 2028.
- The federal seed is not included in the beneficiary’s income, and it does not create basis.
- Qualified general contributions from state, federal, tribal or charitable grants
- These are programmatic grants made to defined classes of beneficiaries.
- They are not included in the beneficiary’s income and do not create basis.
- Section 128 employer contributions
- Employers may contribute under a defined program. Current guidance envisions a $2,500 annual cap per employee for 2026–2027 (indexed after 2028).
- Employer contributions are not included in the beneficiary’s income and do not create basis.
- Qualified custodian-to-custodian rollover contributions
- These occur when the entire balance of one Trump Account for the beneficiary is transferred to another Trump Account for the same beneficiary.
- Rollovers carry forward any existing basis and are not treated as distributions; partial rollovers are not allowed.
Distributions from a Trump Account:
One of the defining features of a Trump Account is that distributions are largely restricted while the account is in the growth period. The default rule is that distributions are not permitted during the growth period; however, there are four narrow, well-defined exceptions:
Permitted actions during the growth period:
- Qualified rollovers
- A one-time ABLE rollover in the calendar year the beneficiary turns 17
- Corrective distributions if a private contribution exceeds the annual limit
- Distributions upon the beneficiary’s death
Distributions in the post‑growth period are taxed under standard IRA rules: the taxable portion is the amount of the distribution less any basis assigned to the assets, and ordinary income tax applies to includible amounts. Early‑withdrawal penalties (e.g., for distributions before age 59½) may apply, and if the beneficiary dies during the growth period, the account is treated as distributed on the date of death, with important tax consequences for the beneficiary of the account.
Conclusion:
The Trump Account is a category of IRA that can help build long‑term savings, particularly for those eligible for the federal pilot seed, state/charitable grants or employer contributions or for those who do not otherwise use annual‑exclusion gifting or lifetime‑exemption strategies. Your Oxford Team of Advisors can help navigate the evolving rules and coordinate with tax and estate advisors to design a gifting strategy that supports your long‑term legacy.
Oxford is aware of the potential issue that gifts to a Trump Account may not qualify as present-interest gifts under section 2053. ACTEC has notified the IRS. This appears to be an unintentional oversight: no language similar to that used in 529 plans was included to allow such gifts to qualify for annual exclusions. The IRS has not yet responded. Because Trump Accounts have not gone live, there is still time to resolve the issue. Oxford will continue to monitor this fluid situation.
Oxford Financial Group, Ltd. (“Oxford”) is a Registered Investment Advisor (“RIA”) with the U.S. Securities and Exchange Commission (“SEC”) and is headquartered in Carmel, Indiana. Registration with the SEC does not imply a certain level of skill or training. Additional information about Oxford, including our Form ADV and Privacy Policy, is available upon request by calling 800.722.2289 or emailing info@ofgltd.com. The content of this presentation is intended for educational and illustrative purposes only. It should not be construed as investment, tax, or legal advice, nor as a recommendation or offer to buy or sell any security or investment product. Tax and legal counsel should be engaged before taking any action. This material has been prepared using original sources believed to be reliable, but no representation is made as to its accuracy or completeness. The views expressed are those of Oxford as of the date of the presentation and are subject to change based on market, regulatory or economic conditions, which may not occur as anticipated. OFG-2602-7
