Key Takeaways:
- New tax‑deferred accounts for children born between January 1, 2025, and December 31, 2028, who are U.S. citizens, will be launched in 2026 with a $1,000 nontaxable government contribution.
- You must elect into the pilot program for the $1,000 contribution to be funded to the child’s account and eligibility requirements must be met.
- Personal contributions may trigger federal gift tax reporting (Form 709) and should be coordinated with your tax advisor.
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A new federally backed tax-deferred savings account for children is set to become available in mid-2026. For qualifying families, these accounts may offer long-term financial benefits — but they also come with administrative complexities and timing sensitivities that require careful planning.
If you’re managing family wealth or evaluating future savings strategies for children or grandchildren, here’s what you need to know:
Background: A New Tax-Deferred Account for Children
Starting in 2026, families will be able to open a new type of account, similar to a traditional IRA, designed to encourage long-term savings for eligible children. These accounts, called “Trump Accounts”, will be seeded with a $1,000 nontaxable government contribution — but only if an election is made in time, and eligibility requirements are met.
Key features include:
- Eligibility: Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens and have a valid Social Security number.
- Activation date: The earliest contributions — including the federal contribution — can be made starting July 4, 2026.
- Annual contribution limits: Families may contribute up to $5,000 per year (subject to gift tax limits) during the growth period which ends on December 31 of the year prior to the child turning 18.
- Employer contributions: Employers may contribute up to $2,500 per year, tax free, to an employee’s child’s Trump Account. Employer contributions count toward the overall $5,000 annual limit and are subject to plan documentation requirements and applicable nondiscrimination testing.
- All contributions made to the account during the growth period are not includible in income by the beneficiary.
- Investment rules: Funds in a Trump Account during the growth period may only be invested in certain eligible investments such as an exchange-traded fund (ETF) that tracks the index of primarily U.S. companies.
- Tax treatment: Accounts grow tax-deferred, with distributions generally taxed as ordinary income after the child turns 18.
- Distributions generally cannot be made during the growth period.
- After the growth period, rules relating to contributions, investments, and distributions are similar to those of a traditional IRA.
Why It Matters for Your Tax Planning
This account structure creates a new planning opportunity alongside existing tools like 529 plans, custodial accounts, and IRAs. Unlike 529 plans, these accounts are not restricted to educational expenses, which gives them more flexibility but also different tax implications.
They may be particularly useful for long-term, multipurpose savings strategies for children — especially when aligned with college, housing, or other financial milestones in adulthood.
No Immediate Tax Deduction — But Long-Term Potential
Contributions to these accounts are made with after-tax dollars and don’t offer an upfront deduction. However, the benefit lies in tax-deferred investment growth — a valuable feature for families prioritizing future wealth accumulation over immediate tax relief.
Be Aware of Gift Tax Reporting Requirements
Under current IRS interpretations, any personal contribution you make to a child’s tax‑deferred account (beyond the government’s pilot deposit) may be treated as a taxable gift because the child cannot access the funds before January 1 of the calendar year in which the child turns 18. Contributions of this type are classified as “future interest” gifts, meaning they do not qualify for the annual $19,000 gift tax exclusion and generally require filing IRS Form 709, United States Gift (and Generation‑Skipping Transfer) Tax Return for each year contributions are made.
While filing Form 709 does not necessarily mean you owe gift tax, the form itself is complex, and your tax advisor or preparer will need to complete it accurately to avoid IRS issues.
You may want to take this reporting requirement into account when planning how and when you contribute to these accounts — especially for contributions from multiple family members or larger annual amounts.
Administrative Hurdles: What to Watch
To receive the first $1,000 contribution, families must actively opt into the program by filling out Form 4547 or through a yet-to-launch digital enrollment platform.
Key reminders:
- Accounts will not be opened automatically
- Eligible children must have a valid Social Security number
- Not all financial institutions will offer these accounts initially, so it’s important to confirm with your custodian
What You Can Do Now
Even though the accounts can’t be funded until mid-2026, there are steps you can take now to be ready:
1. Confirm Eligibility
Ensure Social Security numbers have been issued to eligible children, grandchildren, etc.
2. Talk to Your Wealth Advisor
Ask if your current advisor or custodian plans to support this type of account. Early preparation may help streamline the process once enrollment opens.
3. Review Your Existing Plan
Evaluate how this new savings option complements your current tax and estate planning strategy. It could serve as a flexible alternative or supplement to existing 529 plans or custodial accounts.
Considerations for High-Income Families
If your family uses advanced wealth planning strategies — such as irrevocable trusts, annual gifting, or income-shifting — these new accounts add another layer to your planning.
Contributions may count toward annual gift exclusions, and coordination with your tax advisor will be critical to avoid unintended tax consequences. Because current law treats these contributions as future‑interest gifts, you may be required to file IRS Form 709 for each year you contribute (even if your total gifts don’t exceed the annual exclusion).
How MGO Can Help
MGO supports high-net-worth individuals, families, and business owners in navigating evolving tax laws and planning opportunities. We help you assess how new tax-advantaged vehicles — like these youth savings accounts launching in 2026 — fit into your broader financial strategy.
From personal tax compliance and multigenerational planning to estate and trust structuring, our professionals work across industries including entertainment, sports, private clients, and technology to help you make confident, informed decisions.
Need help preparing for 2026 account elections or coordinating with your existing wealth strategy? Reach out to our Private Client Services team today.