On July 4^th, 2026, a new form of tax-deferred investment accounts for children under age 18 were launched under the Trump Accounts moniker. In the current politically charged environment, we felt it was worthwhile to provide an objective breakdown of the facts, provide key information, and discuss some potential real-world applications.

Trump Account Highlights:

• Can be established for any U.S. children under 18 with a valid Social Security Number.

• Children born 2025 through 2028 are eligible for a one-time $1,000 government seed contribution that does not count toward the annual $5,000 contribution limit per child.

• In some cases, smaller $250 seed investments may be available for children of certain ages and zip codes, largely driven by philanthropic efforts of individuals and corporations.

• Establishing an account requires filing form 4547, which can be done directly through your IRS Individual Account or when filing your normal tax return.

• Only one Trump Account can be created per child.

• Accounts must be established and maintained through the Trump Accounts App. Initially all contributions will automatically be invested in the State Street® SPDR® Portfolio S&P 500® ETF (symbol SPYM) which has an expense ratio of 0.02%. Other options may be added in the future.

• There are no explicit fees for Trump accounts, only the very modest internal expenses of the exchange traded fund.

• Child gains full access to the account at age 18 and account generally follows traditional IRA rules at that point. (more in Distributions section)

Contributions

• Annual contributions of up to $5,000 per child for 2026, increased for inflation in future years, permitted without income limitations or earned income requirements up to the calendar year when the child turns 18.

• Contributions are generally not tax-deductible, unless offered through an employer and in such cases limited to $2,500 per worker (not per dependent).

• Non-deductible contributions create basis in the account, while non-taxable contributions made through an employer and government or philanthropic seed investments do not create basis.

• Each account will have a QR code, making contributions easy for parents, family and friends.

Distributions

• Account value cannot be accessed prior to age 18 except in the event of a premature death of the beneficiary.

• Withdrawals are subject to ordinary income tax rates, and a 10% early withdrawal penalty may apply if taken before age 59.5, absent qualifying exceptions.

• Distributions at age 18 or beyond will follow the "Pro-Rata Rule" where the amount of the distribution that is subject to ordinary income tax rates and possibly 10% early withdrawal penalties, is limited to the ratio of the account value that represents investment earnings, nontaxable employer contributions, and seed funding from the government or philanthropic gifts.

Ex. Account value grows to $15,000, $5,000 in non-deductible contributions were made, any distribution at that time would be characterized as 1/3^rd tax-free return of basis and 2/3^rdsubject to ordinary income taxes and penalties.

• Some exceptions may apply for the 10% early withdrawal penalty such as use for qualified higher education expenses, first-time home purchase (up to $10,000), disability, etc.

Primary Use Case for Trump Accounts

We generally view Trump Accounts as best suited to kickstart retirement savings. Unlike custodial IRAs or custodial Roth IRAs for minors, Trump accounts do not require the child to have reportable earned income to make contributions. This allows parents to start funding and compounding investments for a child's retirement in a tax-deferred environment at an earlier age.

Another potential retirement strategy would be for the child to consider doing a Roth conversion or multiple Roth conversions once they are no longer considered dependents at age 19 or as late as age 24 if they were full-time students. This moves the conversions outside of the realm of “kiddie taxes" but likely coincides with a stage of life where the child's income and marginal tax brackets are low. Potentially this could set up children with a much greater Roth IRA balance early in their adult life than would otherwise be possible.

In addition to the monetary value a Trump account could create over time, the account could also provide an educational opportunity for parents to discuss the account periodically with their children to highlight the benefits of compounding and investing in the largest US publicly traded corporations.

For education funding, it is our view that 529 Accounts are still the best option, as investment earnings are completely tax-free when used for qualified education expenses, and the parent/grandparent remains in control of the assets indefinitely. Trump Accounts have been mentioned as one source of education funding, but it's important to note that using for qualified higher education does not avoid taxes on the deferred investment gains from a Trump Account. The exception for qualified higher education expenses only applies to the 10% penalty for withdrawals before age 59.5. The transition of account control at age 18 also makes Trump Accounts less ideal for education funding as the child would control distributions from age 18 forward.

UTMA accounts allow more investment flexibility and are more efficient for cash needs prior to age 59.5, since they largely follow the same tax treatment as regular taxable accounts. Normal capital gains rules apply and accessing principal is only taxable to the extent the liquidation results in realized capital gains. Whereas Trump Accounts will not be taxable until distributions are taken, UTMAs will be taxable each year based on realized capital gains and income from dividends and interest. UTMAs also may trigger "kiddie taxes" if unearned income is greater than $2,700, where capital gains and ordinary income above that threshold are taxed at the parents' marginal rates. Similar to Trump Accounts, with UTMAs the child gains full, unrestricted control of the assets at the age of majority, typically age 18.

Information on Trump Accounts is still somewhat limited, and we anticipate general program improvements and additional guidance in the coming months and years. We are optimistic that these accounts will lead to broader participation in the compounding power of the US stock market, better financial education of our youth, increased retirement savings, and a platform for easier philanthropic giving at scale.