Trump Accounts: Key points and estate planning considerations

Trump Accounts, created by the One Big Beautiful Bill Act in 2025, are now active as of July 4^th, 2026. Below is a list of key points and to-dos for getting the accounts set up. Before we get to that, however, I’d like to point out a few finer points.

 

For many families, the $1,000 seed contribution for eligible beneficiaries is likely the biggest benefit of these new accounts.

Trump Accounts have similar tax treatment to a pre-tax Traditional IRA and will automatically convert into a Traditional IRA once the beneficiary is no longer a minor.

 

For parents or grandparents who are actively saving for children/grandchildren’s future education expenses, a 529 account may be a better option due to the tax deductibility of some contributions and the tax-free growth those accounts offer. Trump Accounts can be accessed without penalty for college costs but will still be taxable.

 

If 529 accounts are well funded or college will be comfortably cash flowed, however, Trump Accounts may warrant another look. For readers that are currently exposed to a state or federal estate tax bill – or might be in the future – Trump accounts can be a powerful estate planning tool.

 

The Trump Accounts website (trumpaccounts.gov) has a calculator illustrating the potential growth of a Trump Account being funded at $5,000 per year (the current annual maximum) using the historical return of the S&P 500 as the assumed growth rate.

 

At age 18, when the account would generally convert to a Traditional IRA, the Trump Accounts website shows a hypothetical balance of $271,000. Removing that $271,000 from a taxable estate would represent a Minnesota Estate Tax savings of roughly $35,000 at the low end of Minnesota’s current, graduated estate tax scale. That ignores any Federal Estate Tax liability that might be in play. The larger the estate, the larger the potential tax savings opportunity.

 

Once the account converts into a Traditional IRA, that balance could then be converted into a Roth IRA over time. Managing the conversion timing and amount to avoid Kiddie Tax considerations may be prudent and allow for the effective tax rate on the conversion to be considerably lower than parents’ or grandparent’s tax rates. Discuss with your tax advisor, as this could be a massive opportunity for tax-managed wealth transfer to your heirs.

 

So how do these accounts actually work?

 

Key Points

1. A Trump Account can be opened for any child not turning age 18 during the calendar year
2. The $1,000 seed money from the Federal government is currently only available for children born between January 1^st, 2025, and December 31^st, 2028
   • If you have a child or grandchild born in this window this is “free” money
3. Contribution Limits:
   • Contributions are countable as present interest gifts and therefore qualify for the $19,000 annual gift tax exclusion for 2026
   • Individuals can contribute up to a combined $5,000 limit for 2026
   • Employers can contribute up to $2,500 for 2026, includable in $5,000 limit
   • Governments and charities can contribute to a Trump Account, not includable in $5,000 limit

 

Opening the Account

1. File IRS Form 4547 in one of three ways:
   • Submit the form via the Trump Accounts App
   • Submit the form when filing taxes – if you work with an accountant, they should be able to help
   • Submit the form via the IRS website– if you work with an accountant, they should be able to help
2. Create a Trump Account profile
   • Can be done via the Trump Accounts App or website

 

Contributions to the Account

1. Family contributions to Trump Accounts are considered “basis” and should be tracked to avoid unnecessary taxation at the time of distribution
2. Contributions to the account are automatically invested and more investment options will be available over time
3. Recurring contributions via bank link can facilitated inside of the Trump Accounts App
4. One-time contribution via bank link can be facilitated inside of the Trump Accounts App
5. QR Code
   • There is a QR code inside of the Trump Accounts app to allow for others to easily contribute via their smartphone
   • Contributions via the QR code can be made via debit card or debit card linked to mobile payment

 

Distributions from the Account

1. Distributions from Trump Accounts before age 18 are generally prohibited
2. Distributions from Trump Accounts after age 18 will be subject to taxation
3. Distributions from Trump Accounts before age 59 ½ will be subject to a 10% penalty with some exceptions:
   • Qualified education expenses
   • First time home purchase (up to $10,000)
   • Birth or adoption costs (up to $5,000)
   • Qualifying medical expenses, disability, illness

 

I encourage readers to avoid making a decision for using – or not using – these accounts based on the name of the account. Trump Accounts are simply another “arrow in your quiver” for contributing to your loved one’s financial future.

 

Joshua M. Rebholz, CFP® | 651-430-5502 | josh.rebholz@rbc.com

 

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For more information regarding college savings plans, please visit www.collegesavings.org. Participation in a 529 Plan does not guarantee the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses. State programs vary and therefore you should carefully review individual program documents before investing or sending money. Federal income tax on the earnings and a 10 percent penalty on distributions for non-qualified expenses may apply. RBC Wealth Management is not a tax advisor. All decisions regarding the tax implications of your individual investments should be made in connection with your independent tax advisor.