Should You Open One? Probably. But That's Only the First Decision.
Each year, the Fourth of July is a time for celebrating our nation's independence, spending time with family, and, for many of us, reflecting on the future.
This year's holiday weekend also brought a significant new financial planning opportunity. Congress passed legislation creating Trump Accounts, and eligible families can now begin opening these new accounts and claiming the government's one-time $1,000 contribution.
Not surprisingly, we've already begun receiving questions from parents and grandparents asking:
"Should we open one?"
For many eligible families, my answer is yes.
If the government is willing to contribute $1,000 toward your child's or grandchild's future, it's an opportunity worth considering.
But that's only the first decision.
The more important—and often overlooked—question is whether a Trump Account should become your family's primary long-term savings vehicle.
In my opinion, opening the account and deciding where your family's long-term savings belong are two very different planning decisions.
Let's look at both.
What Is a Trump Account?
A Trump Account is a new federally authorized savings account designed to encourage long-term investing for children.
Eligible children born between January 1, 2025 and December 31, 2028 may qualify for a one-time $1,000 government contribution to help jump-start their savings.
In addition, most children under age 18 may have a Trump Account established on their behalf, and parents, grandparents, and others may make additional contributions, subject to current contribution limits.
The account grows tax-deferred, but one important feature is often overlooked.
At age 18, ownership and control of the account transfer to the child.
That single rule has significant planning implications.
Who Can Have a Trump Account?
One of the biggest misconceptions about Trump Accounts is that they are available only for children born between 2025 and 2028.
That's not the case.
Most children under age 18 with a valid Social Security number may have a Trump Account established on their behalf by a parent, legal guardian, or other authorized individual.
The difference is that only children born between January 1, 2025 and December 31, 2028 qualify for the government's one-time $1,000 contribution.
In other words, opening a Trump Account and qualifying for the government's $1,000 contribution are two different eligibility questions.
How to Open a Trump Account
If your child qualifies for the government's contribution, the process is generally straightforward.
Step 1 – Confirm Eligibility
To qualify for the government's $1,000 contribution, the child generally must:
- Be a U.S. citizen
- Have a valid Social Security number
- Be born between January 1, 2025 and December 31, 2028
Step 2 – Complete the Required Enrollment
The government's contribution is not automatic.
A parent, legal guardian, or other authorized individual must complete the required Treasury/IRS enrollment process.
Step 3 – Wait for the Account to Be Established
Once the enrollment has been accepted, the account will be established and funded with the government's contribution.
Step 4 – Decide Whether to Make Additional Contributions
This is where thoughtful planning begins.
Planning Perspective
“Claiming the government's $1,000” and “Deciding where the next $5,000 belongs” are two separate planning decisions.
Why This Matters
Many readers may remember UGMA and UTMA custodial accounts.
Those accounts were created with good intentions, allowing parents and grandparents to invest for children.
The investments weren't the problem.
The challenge was that ownership often transferred before many young adults were financially prepared to manage the money responsibly.
Trump Accounts raise many of those same planning questions.
At age 18, the child—not the parent or grandparent—controls the account and decides whether to:
- Leave the money invested
- Continue saving
- Make withdrawals (subject to applicable taxes and penalties)
Taxes and penalties may discourage early withdrawals, but they don't eliminate the behavioral challenges that can accompany transferring significant financial control at a young age.
Why Many Families May Still Prefer a 529 Plan
For larger long-term savings goals, many parents and grandparents may still find that a 529 plan better fits their objectives.
Unlike a Trump Account, a 529 plan:
- Allows the account owner to retain control.
- Provides tax-free withdrawals for qualified education expenses.
- Allows beneficiaries to be changed if circumstances change.
- May allow unused funds to be rolled into a Roth IRA for the beneficiary, subject to current law and applicable limitations.
For many families, these features provide greater flexibility over time.
Grandparents: One of the Best New Gifting Opportunities
Both Trump Accounts and 529 plans create meaningful opportunities for grandparents to invest in a grandchild's future.
Rather than simply giving another birthday or holiday check, grandparents can help build a financial foundation that may benefit a child for years to come.
The planning question isn't whether to give.
It's how to give in a way that balances opportunity, tax efficiency, flexibility, and long-term stewardship.
One approach many families may consider is:
- Open a Trump Account and claim the government's $1,000 contribution.
- Then evaluate whether future gifts are better directed to the Trump Account, a 529 plan, or another long-term savings strategy.
Our Perspective
For many eligible families, opening a Trump Account and claiming the government's one-time $1,000 contribution is a logical first step.
But claiming the government's contribution shouldn't automatically determine where the next twenty years of savings belong.
That is a separate planning decision—one that should take into account education goals, taxes, estate planning, and perhaps most importantly, who controls the money.
The best financial decisions rarely begin with a product.
They begin with a plan.
Frequently Asked Questions
Should I open a Trump Account?
For many eligible families, yes. If your child qualifies for the government's $1,000 contribution, it's an opportunity worth considering. The more important planning decision is whether future savings should also go into the account.
Who can have a Trump Account?
Most children under age 18 with a valid Social Security number may have a Trump Account established for them by a parent, legal guardian, or other authorized individual.
To qualify for the government's $1,000 contribution, the child must also be a U.S. citizen born between January 1, 2025 and December 31, 2028.
Is the $1,000 government contribution automatic?
No. A parent or other authorized individual must complete the required enrollment process. Simply having an eligible child does not automatically result in the government contribution.
Can grandparents contribute?
Yes. Grandparents, relatives, and others may generally contribute, subject to the annual contribution limits. Both Trump Accounts and 529 plans can be meaningful ways for grandparents to invest in a grandchild's future.
Can Trump Accounts be used for education?
Yes, but unlike a 529 plan, education expenses generally do not make withdrawals tax-free. While certain education withdrawals may avoid penalties, income taxes generally still apply.
How are Trump Accounts different from 529 plans?
The biggest differences are control and taxes. A 529 plan allows the account owner to retain control and provides tax-free withdrawals for qualified education expenses. Trump Accounts transfer control to the child at age 18, and withdrawals are generally taxable.
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