If you’ve heard “Trump Account” at a family dinner lately and nodded along, you’re not alone. These new children’s savings accounts came out of last year’s tax law, and they moved from idea to reality this fall.

On October 1, the Treasury Department announced that automatic enrollment was complete. In its words, “every eligible child under the age of eighteen with a valid Social Security number now has a Trump Account.”

There’s a catch, though. The account exists, but nothing goes into it until a parent or guardian claims it. That includes the $1,000 starter deposit some kids qualify for, and any gifts from grandparents.

So whether you’re a parent, a grandparent, or a business owner with employees who are parents, here’s what’s worth knowing.

How the Account Works

Think of it as a starter retirement account for a child, with a few special rules.

• The $1,000 head start. U.S. citizen children born from January 1, 2025, through December 31, 2028, are eligible for a one-time $1,000 deposit from the Treasury. It isn’t automatic. The account has to be claimed, and the parent opts in through the official Trump Accounts app or with IRS Form 4547.
• Family can add up to $5,000 a year. Parents, grandparents, aunts, uncles, and friends can all contribute, but the IRS describes $5,000 as an aggregate limit for the year, not $5,000 per person. That limit is set to rise with inflation after 2027.
• Employers can chip in. An employer can contribute up to $2,500 a year for an employee’s child, and it doesn’t count as taxable income to the employee. It does count toward the $5,000 yearly total.
• It’s invested simply. The money must go into mutual funds or ETFs that track the S&P 500 or a similar index of mostly U.S. stocks.
• It’s locked until 18. Money generally can’t come out before January 1 of the year the child turns 18. After that, the account generally follows the same rules as a traditional IRA.

A Quick Example

Consider Mia, born in March 2025. Her parents claim her account in the app and opt in to the $1,000 deposit.

Her mother’s employer offers a $1,000-a-year contribution. Mia’s grandparents decide to give $2,000 each birthday instead of another toy. Her parents add $1,000.

That’s $4,000 a year from family and the employer, safely under the $5,000 limit. Over 18 years, it adds up to $72,000 in contributions, plus the original $1,000 seed, before any investment gains or losses.

The grandparents get to watch a real gift grow. Mia gets a meaningful start at 18. And because it’s all invested in a broad index of American companies, nobody has to pick stocks.

Trump Account or 529?

This is the question we’re hearing most, and the answer for many families is “it depends on the goal.”

A 529 plan is built for education. Money used for qualified education costs comes out tax-free, and many states, including Ohio, offer a state income tax deduction for contributions.

A Trump Account is more flexible about what the money is for, but once the child turns 18, withdrawals generally follow traditional IRA rules. That means the growth is generally taxable, and withdrawals before age 59½ may carry a penalty unless an exception applies.

In other words, a 529 may be the better tool for college, and a Trump Account may be a better long-term “head start” account. Some families will use both.

A Note for Business Owners

If you own a business, the employer contribution is worth a look. Up to $2,500 per employee, per year, can go into an employee’s child’s account without being taxed as income to the employee. For a small company competing for good people, that’s a benefit employees with young kids will notice. Your CPA can help you weigh the cost and the paperwork.

What to Do Now

If you have a child under 18, check whether their account has been claimed in the official app. If they were born in 2025 or later, make sure you’ve opted in to the $1,000 deposit.

If you’re a grandparent, ask the parents before you give. Contributions can’t go in until the account is claimed, and everyone’s gifts count toward the same $5,000.

And if you’re wondering how this fits alongside College savings, Gifting, or your own Estate plan, give us a call. We’re happy to help you sort out which account does what for your family!

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