New tax-advantaged accounts tend to generate both excitement and confusion. The recently discussed “Trump Accounts” are no exception.
While the branding has sparked plenty of headlines, the more important conversation is whether these accounts create meaningful opportunities for saving, investing, and long-term financial planning for your family.
What is a Trump Account?
A Trump Account is a new type of investment vehicle for children created under the 2025 One Big Beautiful Bill Act (OBBBA). The custodial account is controlled by the parent or guardian, but legally owned by the child.
The funds cannot be easily accessed until the child reaches 18 years of age. At that point, the account transitions into a structure that generally follows traditional IRA-style tax treatment while retaining the TRUMP Account designation.
The official government site describes the accounts as a way to “jumpstart the American Dream.” The accounts can be created online or by submitting IRS Form 4547.
Who Can Benefit from a Trump Account?
A Trump account can be opened by any U.S. citizen for a child under the age of 18 with a valid Social Security number. Children born between 2025 and 2028 who have a TRUMP Account established for them will receive an initial government “seed” contribution of $1,000.
Additional contributions are limited to $5,000 per year until the year the child turns 18. These contributions can be made by family members, employers, and even charities.
Important Rules and Tax Considerations
Trump Accounts are expected to have more limited investment options than a traditional custodial brokerage account. Current guidance suggests investments prior to age 18 will primarily be restricted to low-cost, diversified U.S. index ETFs and mutual funds.
Because the account transitions to traditional IRA rules at age 18, withdrawals of pre-tax contributions and any earnings from the account will eventually be taxed as ordinary income. Early withdrawals before age 59 ½ will also be subject to a 10% penalty, unless the funds are used for qualifying items like unreimbursed medical expenses, higher education, or a first-time home purchase.
Alternative Options: Trump Account vs. 529 Plan and Custodial Accounts
While Trump Accounts may offer benefits for some families, they are unlikely to replace existing planning tools. The “best” account often depends on the specific goal you are trying to accomplish.
For education savings, 529 plans remain very attractive due to their tax-free qualified withdrawals and potential state tax deductions in the year of contribution. Custodial UGMA/UTMA accounts provide more flexibility regarding withdrawal timing and investment choices, although they come with fewer tax advantages.
The Bottom Line: Time is Your Greatest Asset
It can be easy to get caught up in the excitement of a new investment account created by legislation. But the most important takeaway may have little to do with the account itself.
Whether it is a Trump Account, a Roth IRA, a 529 plan, or a traditional brokerage account, the biggest driver of long-term success is often time. Saving early, investing consistently, and allowing those investments to compound over decades has historically mattered far more than the name of the account.
Determining what investment vehicle and general savings strategy works best for your family’s long-term financial success is a complex decision—but it is one that can be made much easier through the development of a comprehensive financial plan. At THOR Wealth Management, our team is here to help you navigate these new options and build a strategy that protects and grows your family’s wealth for generations.
