Trump Accounts Explained: A Guide for Pennsylvania Families
By Amy Quigg
Trump Accounts are now available under recently enacted federal legislation, giving families a new way to save and invest for a child's future. While the accounts have received significant attention, many parents and grandparents still have questions about who qualifies, how the accounts work, and whether they should consider opening one.
Here's a straightforward overview of what Pennsylvania families should know.
What Is a Trump Account?
A Trump Account is a long-term investment account established under §503A of the Internal Revenue Code for the benefit of a child. The accounts are designed to encourage early investing by allowing contributions to grow over time through investments in a diversified fund.
Unlike a traditional savings account, the money is invested with a long-term strategy intended to maximize growth while managing risk.
Who Is Eligible?
Generally, any U.S. child under the age of 18 with a valid Social Security number is eligible to have a Trump Account established.
In addition, children born between January 1, 2025, and December 31, 2028, may be eligible to receive a one-time $1,000 federal starter contribution, provided they meet the program's eligibility requirements. To qualify a child generally must:
be under eighteen years of age when the account is established
possess a valid Social Security number
satisfy applicable citizenship requirements for receipt of the federal seed contribution; and
have an account properly established by a parent or other authorized individual
Who Can Contribute?
Parents, grandparents, other family members, friends, and even employers may contribute to a child's account.
Annual contributions are generally limited to $5,000 per child (indexed for inflation), although the law includes certain exceptions for qualifying government and employer contributions. The federal seed contribution does not count toward the annual contribution limit.
Recent IRS guidance also confirms that qualifying contributions generally constitute present-interest gifts eligible for the annual federal gift tax exclusion simplifying estate planning for grandparents and other family members wishing to transfer wealth through these accounts.
How Is the Money Invested?
Funds are invested in a diversified investment vehicle intended for long-term growth. Unlike accounts that allow investors to choose from numerous investment options, Trump Accounts are designed to follow a more standardized investment approach focused on broad market growth over many years.
When Can the Money Be Used?
Funds generally become available when the child reaches age 18. Depending on the applicable rules, distributions may be used for qualified purposes such as:
Higher education or job training
Purchasing a first home
Starting a business
Other qualifying expenses permitted under the law
Because these accounts are intended to promote long-term saving, there are restrictions on when and how funds may be withdrawn.
How Do Trump Accounts Compare to Pennsylvania's 529 Plan?
Although both accounts help families invest in a child's future, they are designed to meet different goals.
A PA 529 College and Career Savings Program is specifically intended for education savings and offers valuable Pennsylvania income tax benefits for many contributors. Qualified withdrawals used for education expenses are generally tax-free.
A Trump Account, by contrast, is designed as a broader long-term investment account and generally does not provide the same Pennsylvania state income tax advantages as a PA 529 plan. Further, improper or nonqualified distributions may trigger additional taxes or penalties, making careful planning essential before withdrawals occur.
For many Pennsylvania families, these accounts don't have to be an either-or decision. Depending on your financial goals, a Trump Account and a PA 529 plan may work well together as part of a broader savings strategy.
Should Your Family Consider Opening a Trump Account?
Every family's financial situation is different, but you may want to consider:
Is your child eligible for the $1,000 federal starter contribution?
Are you already contributing to a PA 529 plan?
What are your long-term goals for your child's future?
Would using both a PA 529 and a Trump Account help diversify your family's savings strategy?
Questions About Trump Accounts?
Every family's financial situation is unique. Whether you're welcoming a new child, planning for future education expenses, or evaluating the best way to save for the next generation, understanding how a Trump Account fits alongside other planning tools—such as a PA 529 plan—is important.
The attorneys at HRMM&L can help you evaluate your options and coordinate your savings strategy with your broader estate and financial planning goals. Contact us to learn more.