How Free Federal Money Can Jump-Start Your Child's Financial Future

As part of the OBBBA, which was passed this past summer and signed into law on July 4th, 2025, Trump accounts were created to help families build financial security for their children.

What are Trump accounts?

Trump accounts are tax-advantaged accounts that can be created and funded for children under the age of 18.

How much can you contribute?

Up to $5,000 can be contributed annually per beneficiary. Contributions can come from parents, guardians, family, and friends on an after-tax basis.

The employers of parents or guardians can also contribute up to $2,500 annually. This amount counts toward the $5,000 annual contribution limit of the beneficiary.

What investment options are available?

Accounts can be invested in low-cost index mutual funds and exchange-traded funds (ETFs). These index funds must be broadly based and predominantly invested in U.S. companies, such as the Standard and Poor's 500 stock market index (S&P 500) or Dow Jones U.S. Total Stock Market Index.

Who qualifies for the pilot program?

A pilot program by the federal government will fund $1,000 to accounts for each child born between January 1st, 2025, and December 31st, 2028. Eligible beneficiaries of the pilot program must be U.S. citizens with a Social Security number.

Can organizations contribute too?

The program also allows groups other than family, friends, and employers to contribute to accounts. Under this provision, State & Local Governments, Businesses, and 501(C)3 non-profit organizations can also contribute to qualified beneficiaries. The donor organization can determine the qualifications to receive contributions based on geographic area and year of birth. These contributions do not count against the $5,000 annual limit.

How do the Dell Foundation contributions work?

Recently, philanthropists Michael and Susan Dell announced a generous donation of $6.25 billion to fund $250 for 25 million accounts of beneficiaries under the age of 10 that are not part of the initial government pilot program. These donations are limited to beneficiaries in ZIP codes with a median annual income under $150,000.

What happens when your child turns 18?

Accounts grow tax-deferred and convert to a Traditional IRA for the beneficiary child once they turn 18. Beneficiaries can let the accounts continue to grow as a retirement account or withdraw the money. Distributions are subject to a 10% early withdrawal penalty if taken before 59 1/2, but the IRS allows for exceptions to the penalty for certain events, such as paying for higher education or up to $10,000 for a first-time home purchase. Taxes are also due on withdrawals, except for the portion of the account funded with after-tax contributions (please consult a tax or financial advisor for help with this pro rata calculation).

How do you open an account?

Accounts can be created in 2026 by an authorized adult (such as a parent or legal guardian) for an eligible child by completing IRS Form 4547, Trump Account Election(s), or by using the online tool or application expected to be available on trumpaccounts.gov in the middle of 2026. Contribution to Trump Accounts, including the $1,000 pilot program, can begin after July 4th, 2026.

Ready to learn more?

Clients should talk to their tax or financial advisors for specific advice, or schedule a 1:1 meeting with a Fruition Mentor to better understand these accounts.