A new federal savings account for children has arrived, and it is generating a lot of questions from South Carolina families. Created under the One Big Beautiful Bill Act and launched in July 2026, the accounts, commonly called Trump Accounts, give parents and families another long-term savings tool to help build financial security for the next generation. This guide explains what these accounts are, how they work, and how they fit into a broader family wealth and estate planning picture, from the estate planning team at Smith Law, LLC. As with any new law, some details are still being finalized, so this is a general overview rather than tax or investment advice. Like any long-term savings vehicle, a Trump Account should be evaluated as one component of an overall financial and estate plan rather than in isolation.
What Is a Trump Account?
A Trump Account is a traditional individual retirement account established under Internal Revenue Code Section 530A, created for children under the age of 18 who are U.S. citizens with a Social Security number. Investment earnings generally grow on a tax-deferred basis while the account remains subject to its special statutory rules during the child’s growth period. The special statutory rules governing Trump Accounts generally cease to apply after the growth period, after which the account is generally governed by the rules applicable to traditional IRAs.
The accounts became available in 2026, and contributions can be made beginning in July 2026. A child may have only one funded Trump Account.
The $1,000 Federal Seed Deposit
The feature that has drawn the most attention is a one-time federal contribution. Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a Social Security number, are eligible for a one-time $1,000 deposit from the federal government to start their account. Families elect to receive this deposit as part of opening the account. This initial federal contribution does not count against the annual contribution limit.
It is worth understanding that this $1,000 seed deposit is limited to children born in that specific window. Families with older children can still open and contribute to a Trump Account, but those children are not eligible for the federal seed money.
How Contributions Work
Beyond the federal seed deposit, families and others can contribute to a child’s Trump Account, generally up to an annual limit of $5,000, a figure scheduled to adjust for inflation after 2027. A notable feature is who may contribute. Parents, grandparents, other relatives, family friends, and even employers can add to a child’s account, subject to the applicable limits. This makes the account a flexible vehicle for family members who want to contribute to a child’s long-term financial future.
One point that distinguishes these accounts from ordinary retirement accounts: a child does not need to have earned income for contributions to be made during the years they are a minor. This is a meaningful difference, because it has historically been difficult to save in a retirement-style account for a child who has no income from work.
It is important to note that investment options are more limited during the account’s growth period than in an ordinary brokerage account. The statute generally limits investments to qualifying diversified, low-cost index mutual funds or ETFs meeting federal requirements. Available investment choices may therefore be narrower than other investment accounts.
When the Money Can Be Used
Trump Accounts are designed for long-term saving, and the rules reflect that. Withdrawals are generally restricted during the account’s statutory growth period. Once the special growth-period rules no longer apply, distributions are generally governed by the traditional IRA rules. These rules include potential penalties for early withdrawals, though traditional IRA statutory exceptions (such as for certain higher education expenses or a first-time home purchase) may apply. These are not unique benefits created specifically for Trump Accounts, but rather existing traditional IRA exceptions. Applicable tax rules should be reviewed carefully before planning withdrawals.
Because the tax treatment of withdrawals can be complex, depending on which portion of the account is being withdrawn, families who plan to use these accounts should understand the rules before relying on them, ideally with guidance from a qualified tax or financial professional.
How Trump Accounts Fit Into Family Wealth Planning
For an estate planning attorney, the most interesting aspect of Trump Accounts is not the $1,000 headline. It is that these accounts offer families another tool that may assist with intergenerational wealth transfer while offering favorable tax treatment within the framework established by federal law. For grandparents in particular, the ability to contribute to a grandchild’s account can be an attractive part of a broader gifting and legacy strategy.
Contributions may serve as part of a broader lifetime gifting strategy. Qualifying contributions are generally treated as completed gifts, and current IRS guidance indicates that qualifying contributions generally qualify for the federal annual gift tax exclusion. Families should coordinate gifting strategies with their overall estate and tax planning.
That said, Trump Accounts are one tool among several. Families have long used other vehicles, such as 529 education savings plans and custodial accounts, to save for children, and each has its own features, advantages, and limitations. A Trump Account may complement these tools rather than replace them. The right approach depends on a family’s goals, whether the priority is education, general long-term security, or intergenerational wealth transfer.
| Feature | Trump Account | 529 Plan | UTMA/UGMA Custodial Account | Roth IRA for Kids |
|---|---|---|---|---|
| Primary Purpose | Long-term investment (converts to traditional IRA at adulthood) | Qualified education expenses | General savings and asset transfer | Long-term retirement savings |
| Earned Income Required? | No (during growth period) | No | No | Yes |
| Federal Seed Deposit? | Yes ($1,000 for eligible birth years) | No | No | No |
| Tax Treatment | Tax-deferred growth during growth period; traditional IRA rules apply after | Tax-free growth for qualified education withdrawals | Subject to “kiddie tax” rules on unearned income | Tax-free growth; qualified withdrawals tax-free |
| Withdrawal Rules | Restricted during growth period; traditional IRA rules (including early withdrawal penalties) apply after | Penalty-free for qualified education expenses; 10% penalty plus taxes on non-qualified withdrawals | No restrictions once transferred; child gains full control at age of majority | Contributions withdrawable anytime; earnings subject to rules and potential penalties |
| Investment Flexibility | Limited to qualifying diversified index funds/ETFs during growth period | Limited to plan investment options | Broad (stocks, bonds, mutual funds, real estate) | Broad (through IRA custodian) |
| Estate Planning Considerations | Completed gift; may qualify for annual gift tax exclusion | Completed gift; may qualify for annual gift tax exclusion; 5-year election available | Irrevocable completed gift; included in child’s estate | Completed gift; may qualify for annual gift tax exclusion |
It is also worth coordinating any contributions to a child’s account with your overall estate plan. Gifting strategies, including contributions to accounts for children and grandchildren, work best when they fit within a thoughtful, coordinated plan rather than happening in isolation. Because assets held for a child may affect eligibility for certain means-tested public benefits, including Supplemental Security Income (SSI) or Medicaid, families with a child who has special needs should coordinate any planned contributions with an attorney experienced in special needs planning before funding the account.
A New Tool Worth Understanding
Trump Accounts are a genuinely new feature of the savings landscape, and because they are new, the practical details continue to develop. Families interested in using them should stay informed as the program matures and should think about how the accounts fit into their larger financial and estate planning picture rather than viewing them in isolation.
At Smith Law, LLC, we help Bluffton and Beaufort County families think through wealth transfer and legacy planning across generations. While the investment mechanics of a Trump Account are handled through the account provider, we can help you understand how contributions to children and grandchildren fit into your broader estate plan and gifting strategy.
Please keep in mind that Trump Accounts are a newly implemented federal program. Additional guidance from the Treasury Department, the IRS, and financial institutions may continue to clarify operational details. Families should stay informed as implementation continues.
Contact Smith Law, LLC
If you would like to discuss how to build and pass on wealth to the next generation as part of a coordinated estate plan, we can help. Our Bluffton office serves families throughout Beaufort County.
Contact our Bluffton estate planning attorneys at (843) 705-4400 to schedule a consultation.
Frequently Asked Questions
Who is eligible for a Trump Account?
A Trump Account can generally be opened for a child under the age of 18 who is a U.S. citizen with a Social Security number. The child is the owner of the account. A parent or other eligible adult generally establishes and serves as custodian until the applicable custodial rules end.
Which children get the $1,000 federal deposit?
The one-time $1,000 federal seed deposit is available for children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a Social Security number. Older children can still have a Trump Account but are not eligible for the federal seed money.
How much can be contributed to a Trump Account each year?
Contributions are generally limited to $5,000 per year, a figure scheduled to adjust for inflation after 2027. Parents, grandparents, other relatives, friends, and employers may contribute, subject to the applicable limits. The $1,000 federal seed deposit does not count toward this limit.
How is a Trump Account different from a 529 plan?
The two account types serve different purposes. 529 plans primarily provide tax advantages for qualified education expenses, while Trump Accounts are intended as long-term investment accounts that later become subject to traditional IRA rules. Many families may find that both accounts can complement one another within an overall financial plan.
Can I use a Trump Account for a child with special needs?
Assets held for a child may affect eligibility for means-tested public benefits, including SSI or Medicaid, depending on the child’s circumstances. Families should coordinate contributions with an attorney experienced in special needs planning before funding the account.