July 4 is not only the 250th anniversary of the signing of the Declaration of Independence — it is also the day a new children's savings vehicle became available nationwide. Created under the One Big Beautiful Bill (also known as the Working Families Tax Cuts), these accounts are formally established as a new type of individual retirement account and are widely referred to as “Trump Accounts” or “530A accounts,” after the related section of the tax code.

Since they were announced, our clients at Hampton Square Wealth Management have asked a lot of questions: How do these accounts actually work? Who benefits? And should we be funding one for our children or grandchildren? This guide walks through the essentials so you can make an informed decision — and know which questions to bring to your advisor.

A Trump Account is a tax-advantaged retirement account established on behalf of a child under age 18 who holds a valid Social Security number. The IRS treats it as a new category of IRA, opened through a parent or legal guardian on the child’s behalf. While it shares some DNA with a custodial IRA, it comes with its own set of rules.

Key Features

•       Contributions may come from parents, grandparents, other relatives, friends, employers, and certain qualifying charities or government entities.

•       Contributions from individuals are made with after-tax dollars.

•       Unlike a Roth IRA, the child does not need earned income for money to go into the account.

•       The child is the legal owner of the account. A parent or guardian acts as custodian until the child turns 18.

•       Once the child reaches 18, the account converts to a traditional IRA and is generally governed by the same rules that apply to any other traditional IRA.

•       Funds must be invested in mutual funds or ETFs that track the S&P 500 or a similarly broad U.S. equity index.

One distinctive feature of Trump Accounts is that an employer can contribute up to $2,500 a year on an employee's behalf through a Section 125 cafeteria plan. These contributions:

•       Can be directed to the employee’s own account or to the account of the employee’s dependent child.

•       Are excluded from the employee’s taxable income.

•       Count toward — rather than add on top of — the overall $5,000 annual contribution limit.

For many families, simply opening an account is worth doing because of the contributions that come with it.

Federal Seed Contribution

Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number are eligible for a one-time $1,000 pilot-program contribution from the federal government.

Dell Foundation Contribution

Children under age 10 living in qualifying ZIP codes where median household income is below $150,000 may also receive a $250 contribution from the Michael and Susan Dell Foundation. This contribution is capped at the first 25 million activated accounts nationally, and enrollment has been building steadily since accounts opened.

The Catch

None of these contributions are automatic. A family must open and activate an account before any federal, foundation, or employer money can be deposited.

Investment returns are never guaranteed, but time is a powerful ally for a savings account opened at birth. The table below illustrates how a single $1,000 contribution, left untouched, might grow at an assumed 6% average annual rate of return — for illustration purposes only.

Hypothetical illustration only, assuming a single initial $1,000 contribution and a constant 6% annual rate of return with no further contributions, withdrawals, or fees. Actual results will vary based on market performance, fees, and investment selections, and are not guaranteed.

Opening an account and funding it beyond the free contributions are two separate decisions. Capturing the federal seed money and any foundation or employer dollars is usually a straightforward call. Whether to direct your own savings into the account is a different question — one that depends on your family’s broader goals and the other savings vehicles already available to you, including 529 plans, UTMA/UGMA custodial accounts, and Roth IRAs.

Four factors tend to matter most when deciding where a savings dollar should go:

•       Contribution limits

•       Tax treatment

•       Intended use of the funds

•       Access and control over time

Contribution Limits

Because the Trump Account limit is comparatively low, it will likely complement rather than replace other savings vehicles for most families.

Tax Treatment

All four account types are funded with after-tax dollars; the real differences show up when money comes out. Trump Account withdrawals are taxable as ordinary income (with kiddie-tax rules potentially applying to a child’s earnings), 529 withdrawals are tax-free when used for qualified education expenses, UTMA/UGMA earnings are taxed annually to the child (again subject to kiddie-tax rules), and qualified Roth IRA withdrawals in retirement are generally tax-free.

State Tax Considerations

Many states offer a tax deduction or credit for 529 contributions. Individual contributions to a Trump Account do not receive a federal deduction, and not every state currently conforms to the new federal rules — which means third-party contributions or annual earnings could be taxed differently at the state level, and the account may not automatically receive IRA treatment under state law. Because rules are still developing state by state, it’s worth reviewing your specific situation with a tax advisor.

Intended Use

A 529 plan is built specifically for education expenses. A Roth IRA is built for retirement, with some flexibility for a first home or education. A UTMA/UGMA account can be used for any purpose once the child reaches the age of majority. A Trump Account sits between these: it offers more flexibility than a 529 — funds can eventually be used for retirement, qualified education costs, or a first-time home purchase — but withdrawals are taxable, unlike qualified 529 withdrawals.

Access and Control

A 529 plan keeps the account owner (typically a parent) in control indefinitely, which is one reason families who value ongoing flexibility often lean toward 529s. A Trump Account, by contrast, passes full ownership and control to the child at age 18, similar to a UTMA/UGMA account reaching its age of termination.

Who can open a Trump Account?

A parent or legal guardian generally opens the account on behalf of an eligible child. A grandparent may open one only if the child is their tax dependent.

Can grandparents, other family members, or friends contribute?

Yes. Contributions can come from a wide range of people, subject to gift-tax considerations. The IRS has recently issued guidance addressing how Trump Account contributions coordinate with annual gift-tax exclusion rules, which may reduce gift-tax return filing obligations for many contributors — ask your tax advisor how this applies to your situation.

Are contributions tax deductible?

No. Contributions from individuals are made with after-tax dollars. Employer and qualifying foundation or government contributions are generally excluded from taxable income. Because both pre-tax and after-tax dollars can end up in the same account, careful basis tracking may matter at withdrawal time.

Do children need earned income to have an account funded?

No. Unlike a Roth IRA, a Trump Account does not require the child to have earned income.

Can the money be used for college?

Yes. Qualified higher-education expenses allow for penalty-free withdrawals, although the withdrawal itself is still taxable, and kiddie-tax rules could apply to a portion of the earnings.

Can the money be used to buy a first home?

Yes. A first-time home purchase qualifies for a penalty-free withdrawal, though ordinary income tax still applies.

When can withdrawals begin, and when does the child gain control?

No withdrawals are permitted before January 1 of the calendar year the child turns 18. At that point, the account converts to a traditional IRA and the child assumes full ownership and control.

Should our family wait before contributing our own money?

Possibly. Because the combined annual limit from all sources is $5,000, it can be worth confirming whether an employer contribution or other third-party gift is coming before committing your own full contribution for the year.

One of the most common questions we hear is whether a Trump Account is “better” than a 529 plan. The honest answer is that it depends on your goals — and for many families, the two accounts work best side by side.

A Trump Account May Be Attractive If:

•       You want to capture the available federal seed contribution.

•       Your employer offers a Trump Account contribution program.

•       You value flexibility to use funds for retirement, education, or a first home, not education alone.

•       Long-term retirement savings for your child is a priority.

A 529 Plan May Be More Attractive If:

•       Education is the primary savings goal.

•       You want tax-free withdrawals for qualified education expenses.

•       You want to retain control over the assets beyond age 18.

•       You expect to contribute more than $5,000 per year.

•       Your state offers a meaningful tax incentive for 529 contributions.

Accounts became available to open and fund starting July 4, 2026. To establish one, a parent or guardian generally needs to:

•       Sign in to, or create, an IRS Individual Online Account using ID.me.

•       Complete and submit IRS Form 4547, Trump Account Election(s), to elect the child into the program.

•       Have on hand the child’s Social Security number, date of birth, and address — the IRS estimates the process takes about 5 to 10 minutes.

You can also open an account through a participating custodian. Because several unaffiliated websites have launched with similar-sounding names, families should confirm they are using an official source — irs.gov/trumpaccounts or trumpaccounts.gov — before entering any personal information.

For most families, opening a Trump Account simply to capture the available federal contribution is an easy decision. Whether it becomes a central piece of your child’s long-term savings strategy is a more personal question — one that depends on your goals, your tax situation, and how much flexibility and control you want to preserve.

A Trump Account can work alongside other tools — 529 plans, Roth IRAs, and custodial accounts — rather than replace them. At Hampton Square Wealth Management, we’re here to help you think through where each savings dollar can do the most good for your family, both this year and over the decades ahead.

Have questions about opening or funding a Trump Account for your child or grandchild? Contact Hampton Square Wealth Management to talk through how it fits into your family’s overall financial plan.

This material is for general informational and educational purposes only and does not constitute tax, legal, or individualized investment advice. Rules governing Trump Accounts are new and subject to further IRS and Treasury guidance; details may change. Please consult your tax advisor and your Hampton Square Wealth Management advisor before opening or funding an account or making related contribution decisions.

Investment advice offered through OneAscent Financial Services LLC, DBA Hampton Square Wealth Management. Registered Investment Advisory services through OneAscent Financial Services LLC may be offered in any US State.