Understanding the New “Trump Account” Created by OBBBA: What Families Should Know

This past summer, Congress passed the One Big Beautiful Bill Act (OBBBA), a wide-ranging piece of legislation that introduced several tax updates and—most notably—a brand-new type of investment account aimed at helping children build long-term financial security. These accounts, informally nicknamed Trump Accounts, are designed to kickstart financial independence for the next generation.

While the final details are still emerging, here’s what families should know now so they can begin considering whether this new tool might fit into their long-term planning.

When Will Trump Accounts Be Available?

Although the legislation has passed, these accounts will not be available right away. The rollout timeline is as follows:

• Accounts become available: Mid-2026

• Earliest date contributions can be made: July 4, 2026

This 12-month preparation window is designed to give custodians and brokerage firms time to build the infrastructure required for this new account type. As of today, many custodians have not yet confirmed whether they will support Trump Accounts. Families should expect more concrete information in early 2026.

Who Can Contribute?

One of the appealing aspects of the Trump Account is its flexibility in who is allowed to put money in. Contributions may come from:

• Parents

• Grandparents

• Guardians

• Employers

• Other individuals

• The U.S. government

Contribution Limits

• $5,000 annual contribution limit

• The child does not need earned income to receive contributions

• No contributions allowed after the child turns 18

• A one-time $1,000 government contribution is provided to children born between January 1, 2025 and December 31, 2028

  • This bonus does not count toward the $5,000 annual limit

Investment Restrictions You Should Know

Unlike many traditional investment accounts, Trump Accounts come with strict investment guidelines. Funds must be invested in:

• Low-cost mutual funds or ETFs

• That track a broad, major market index (such as the S&P 500)

While this aligns closely with long-term, low-cost investment philosophies, it also means choices are limited. Families with more specialized goals or those who prefer diversified strategies beyond index funds may find the lack of flexibility restrictive.

How the Trump Account Is Taxed

The tax structure of Trump Accounts blends qualities from both 529 education accounts and Traditional IRAs.

Contributions

• Made with after-tax dollars

• No tax deduction

• Contributions from parents, grandparents, and others become basis, which can be withdrawn tax-free

Growth

• Investments grow tax-deferred

Withdrawals

• Withdrawals are generally restricted until the child turns 18

• At age 18, the account converts to a Traditional IRA

• Early withdrawals of earnings (before age 59½) are subject to:

  • Ordinary income tax

  • A 10% penalty

A Roth conversion may also be possible at age 18, which could be incredibly advantageous for a young adult with a low income tax bracket.

Proportional Withdrawal Rules

Each withdrawal is a blend of basis and earnings.
For example, if the account is 60% basis and 40% earnings, then 40% of any withdrawal is taxable (and subject to penalties if early).

Are Trump Accounts the Best Way to Save for Your Child?

There are meaningful advantages—especially the government’s $1,000 contribution for eligible children. Still, the Trump Account is not automatically the best or most tax-efficient option for every family.

Depending on your goals, alternative vehicles such as:

• 529 plans

• Custodial Roth IRAs

• UTMA/UGMA accounts

may offer more flexibility or more favorable tax treatment.

For families focused on long-term generational wealth building—not just education funding—Trump Accounts may be one piece of a larger strategy rather than a standalone solution.

What Comes Next?

Between now and mid-2026, we expect to see more clarity around:

• Which custodians will offer Trump Accounts

• How contribution and conversion mechanics will be implemented

• Whether any tax details or investment restrictions will be refined

As with most new legislation, the early years often bring updates, clarifications, and real-world adjustments.

How We Can Help

If you’re curious about whether a Trump Account fits into your family’s long-term planning—or how it compares to other savings vehicles—we’re here to guide you. Our team will continue monitoring developments closely and will keep you updated as custodians release more information.

In the meantime, if you’d like to talk through strategies for children, grandchildren, or future generations, we’re always just a call, text, or email away.