A new type of tax-advantaged account for children is set to launch this summer, and for families thinking about long-term wealth building, it is worth understanding.
Trump Accounts became law as part of the One Big Beautiful Bill Act in 2025, and contributions can begin on July 4, 2026. The structure of these accounts is straightforward. The planning opportunity, particularly around Roth conversions, is more interesting than it might first appear.
What a Trump Account Is
A Trump Account is a custodial-style traditional IRA established for a child under age 18. The account is owned by the child and administered by a parent or guardian until the beneficiary turns 18, at which point it converts to a standard traditional IRA subject to normal IRA rules.
Any child under 18 with a Social Security number is eligible. Contributions of up to $5,000 per year can be made by parents, grandparents, other family members, and friends, with no earned-income requirement and no income limit for contributors. Employers may contribute up to $2,500 annually, with the amount counted against the $5,000 annual limit.
Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens, are also eligible for a one-time $1,000 government seed contribution, which does not count against the annual limit.
Investments during the growth period of the accounts are restricted to low-cost U.S. equity index funds, specifically mutual funds or exchange-traded funds (ETFs) that track a broad U.S. stock index, do not use leverage, and carry annual expenses below 0.10%. No withdrawals are permitted before age 18, with narrow exceptions for death or certain rollovers.
How Trump Accounts Compare to 529s and UTMAs
Families already have several options for saving on behalf of children, and Trump Accounts do not replace them. They just add a new tool with a different set of trade-offs.
A 529 plan is purpose-built for education expenses. Contributions grow tax-free, and withdrawals for qualified education costs are also tax-free. The limitation is flexibility. If the child does not use the funds for education, the options narrow considerably. There is a provision that allows up to $35,000 to roll into a Roth IRA after the account has been open for 15 years, but it comes with conditions and is not a full solution.
A UTMA account offers the most flexibility. There are no restrictions on how the funds can ultimately be used, and there are no contribution limits. The trade-off is taxes. Earnings in a UTMA are taxed annually. Once the child reaches the age of majority, the assets belong to them outright, with no conditions.
Trump Accounts sit in a different category. The funds are locked in until age 18 and restricted to index funds during that period, limiting short-term flexibility. But the tax structure and what it makes possible in early adulthood is the real story.
The Roth Conversion Opportunity
This is the aspect of Trump Accounts that deserves the most attention, and the reason they are worth taking seriously as a planning tool.
Contributions to a Trump Account from individuals are made with after-tax dollars. Over 19 years at $5,000 per year (from birth through age 18), a family builds $95,000 in after-tax basis inside the account, with investment growth on top of that. When the child turns 18 and the account becomes a traditional IRA, they have a meaningful opportunity: If their income is low in their early adult years, as it often is, they can convert some or all of those assets to a Roth IRA at a very low tax rate.
The tax on conversion applies only to the earnings, not the after-tax contributions. A young person working an entry-level job, or in school, may be in the 10% or 12% bracket. Converting in that window could allow them to move a significant amount into a Roth at minimal tax cost.
A 22-year-old starting their financial life with a Roth IRA built on nearly $95,000 in contributions — plus years of investment growth — enjoys an extraordinary head start. Under current rules, there is essentially no other way to accomplish this outside of a parent who owns a small business and can place the child on payroll to fund a custodial Roth IRA through earned income.
This is the key differentiator versus a UTMA. A UTMA offers no Roth conversion pathway. A 529 does have a limited provision allowing up to $35,000 to roll into a Roth IRA after the account has been open for 15 years, but it is not comparable in scale. Trump Accounts offer a meaningfully larger opportunity for Roth conversion, and without the restrictions tied to education use.
A Note on Pending Guidance
Trump Accounts are new, and IRS and Treasury guidance is still being developed. One open question involves the gift tax treatment of contributions, specifically whether they qualify for the annual gift tax exclusion or whether they may be treated as future interest gifts, which would affect how contributions are reported. Families should be aware that some details are not yet fully settled, and it is worth staying current as additional guidance is released.
How We Can Help
Determining how a Trump Account fits alongside a 529, a UTMA, or other savings vehicles depends on your family's goals, tax situation, and timeline. As part of our financial planning work with clients, we help families think through which accounts make sense and how they work together. If you would like to discuss how Trump Accounts could fit into your overall financial plan, we would be glad to talk it through. Schedule a call with a fiduciary, fee-only financial advisor.