Understanding the Trump Account: A New Tool for Generational Planning

You may have heard of a new account called a Trump account (the IRS name is a 530A account). This is a new type of account first announced during the passage of the One Big Beautiful Bill. It pairs itself well alongside other more conventional accounts for children, including the 529 and the custodial account. The Trump account is essentially a hybrid between a custodial account and a traditional IRA, with a bit more nuance. In this newsletter, we are going to cover how it operates, who can fund it, what investment types can be used in it, and how it pairs with other accounts you may set up for a child or grandchild.

How It Works

The Trump account starts off as a very restrictive custodial account when opened. The account is designed to be opened for an individual under the age of 18, As of right now, the only investment choices for this account are U.S. growth company ETFs, which for a young child can be considered adequate anyway. The limited investment menu may feel constraining to seasoned investors, but it is worth remembering that simplicity and consistency over time are often more powerful than sophistication. A young child with decades of compounding ahead of them does not need a complex portfolio. They need time in the market, and this account is designed to provide exactly that.

The current maximum contribution is $5,000 per year in total; however, this number is indexed for inflation and we expect it to grow over time. This is where it differentiates from a normal custodial account. UTMA and UGMA accounts have no contribution limit, whereas the Trump account limits are very strict. There are exceptions to this rule, however. If the child the account is set up for was born between 2025 and 2028, the federal government will seed the account with a $1,000 deposit, completely independent from the $5,000 annual limit. A donation from a qualifying charity is also an exception. The Michael and Susan Dell Foundation will additionally be gifting $250 to eligible children. Unlike the age-based federal seed donation, the Dell gift is based on the average income in the zip code where you live. Once the child reaches 18, the account transitions to a traditional IRA, and all the normal rules associated with a traditional IRA will apply.

The Tax Structure and Where It Gets Interesting

Where it gets complicated is how the taxes work. The account is funded with after-tax dollars, meaning there is no deduction for contributions as there is with a traditional IRA, and it grows tax-deferred. What is going to trip a lot of people up is how the money is taxed on the way out. Those of you familiar with after-tax 401(k) contributions, or who have after-tax funds in your IRA, will recognize this dynamic. When the account transitions to an IRA at age 18, a portion of the balance will be after-tax dollars and a portion will be pre-tax. This means that when a withdrawal is made, a portion will be tax-free (because of the basis in the account) and a portion will be taxable (because of the growth). This works differently from a traditional IRA, which is taxed on the entire amount at withdrawal because the funds contributed were pre-tax.

Like a traditional IRA, however, any taxable portion from the Trump account will be taxed at ordinary income rates. This is an important distinction, as it is not capital gains treatment. That said, this tax structure opens the door to meaningful planning opportunities. Because a portion of the account already carries basis, Roth conversions become particularly attractive at a time when the child's taxable income is likely to be very low, think early adulthood, perhaps while they are still in school or early in their career. Converting in those lower-bracket years could allow much of the growth to eventually come out tax-free, making this account a surprisingly powerful long-term planning tool in the right hands.

Proper recordkeeping will be essential. Tracking basis in this account over the years will be critical to ensuring withdrawals are taxed correctly down the road.

How It Compares to What Already Exists

The Trump account is a unique vehicle that offers some new advantages, but how does it compare to the accounts that already exist? For the longest time, there were primarily only custodial and 529 accounts available for children. This structure is fine for many people and, in many circumstances, remains adequate. From an accessibility standpoint, the custodial account still has the Trump account beat, as there are no restrictions on how or when funds can be used. And the 529 has always been its own category, education-specific, with a few features added by the passage of SECURE Act 2.0, including the ability to roll unused funds into a Roth IRA under certain conditions.

Where we believe the Trump account fills a gap is in having an account you can definitively tell your child or grandchild not to touch until retirement, or only as a last resort. With the custodial account, there is no restriction and no penalty on how funds are used. Once a child reaches the age of majority, those funds are entirely theirs to do with as they please. That is not inherently a bad thing, but it does make it difficult to earmark money for the truly long term. The Trump account solves for that with its IRA-like structure and the withdrawal restrictions that come with it.

Now, with the Trump account, parents and guardians can give their children the freedom to use the custodial account for real-life expenses in adulthood, such as a car, a home, a wedding, or children of their own, while the Trump account remains reserved for the long term. Used together, these accounts tell a clear and compelling story: here is money for your life, and here is money for your future. It is much easier now to segment funds for young family members while teaching them financial responsibility along the way.

The Bottom Line

No single account is the right answer for every family, and the Trump account is not meant to replace what already exists. It is meant to complement it. When used thoughtfully alongside a custodial account and a 529, it rounds out a comprehensive financial picture for the next generation. If you have children or grandchildren you would like to discuss planning strategies for, we encourage you to reach out. There has never been a better time to start building a foundation on their behalf.

U.S. Congress. "One Big Beautiful Bill Act." 119th Congress, 2025. Introduced in the House of Representatives as H.R. 1. Includes provisions establishing Section 530A accounts (Trump Accounts). Washington, D.C.: U.S. Government Publishing Office, 2025.

Internal Revenue Service. "Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) Custodial Accounts." IRS Publication 929, Tax Rules for Children and Dependents. Washington, D.C.: IRS, 2024. Available at: https://www.irs.gov/publications/p929

Michael and Susan Dell Foundation. "Trump Account Gifting Initiative for Eligible Children." Press Release. Austin, TX: Dell Foundation, 2025. Available at: https://www.msdf.org

Internal Revenue Service. "Basis of Assets and After-Tax Contributions." IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). Washington, D.C.: IRS, 2024. Available at: https://www.irs.gov/publications/p590b

Internal Revenue Service. "Roth Conversions and Tax Planning Strategies." IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs). Washington, D.C.: IRS, 2024. Available at: https://www.irs.gov/publications/p590a

U.S. Congress. "Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022." Division T of the Consolidated Appropriations Act, 2023. Public Law 117-328. Includes provisions for 529-to-Roth IRA rollovers. Washington, D.C.: U.S. Government Publishing Office, 2022.