Trump Accounts

What is a Trump Account?

A Trump Account is a specific type of investment account for a United States citizen under the age of 18. Its characteristics include:

• The child is the legal owner and beneficiary of the account.
• Any adult — such as a parent, guardian, grandparent, or adult sibling — may act as custodian.
• Investment options are limited to mutual funds or ETFs that track either:
  • The S&P 500 Index, or
  • Another index consisting of equity investments primarily in U.S. companies.

How is a Trump Account created?

To create a Trump Account, you can either submit an IRS Form 4547 or apply by downloading the official Trump Accounts app. It’s important to note that there can only be one Trump Account per child — anyone wishing to create a Trump Account for a child should ensure the child does not have one already.

Who can contribute, and how much?

With certain exceptions, each Trump Account has an overall annual contribution limit of $5,000. This limit will be adjusted for inflation beginning in 2028. Contributions may come from the following:

Individual contributions

• Individuals may contribute up to $5,000 per year per Trump Account.
• Any contribution by an individual will create basis in the account, but other contributions will not.
• All individual contributions count toward the $5,000 annual limit per Trump Account. Note that contributions to a Trump account will not impact the contributor’s own retirement account contribution limits.

Employer contributions

• Each year, employers may contribute up to a total of $2,500 per employee, which can be split among Trump Accounts for the employee and the employee’s dependents.
• Employer contributions are not counted as taxable income to the employee.
• All employer contributions count toward the $5,000 annual limit per Trump Account.

Government and charitable contributions

• Governments and charitable entities may contribute to Trump Accounts for a qualified class of beneficiaries.
• These contributions are not included in the beneficiary’s income.
• These contributions do not count toward the $5,000 annual limit.

Federal pilot program: A $1,000 head start

As an incentive to encourage early adoption of Trump Accounts, the U.S. Department of the Treasury is offering a one-time pilot program contribution.

• The contribution amount is $1,000 for every U.S. citizen born from January 1, 2025 through December 31, 2028.
• This contribution does not count toward the $5,000 annual limit.

How can funds be used?

Before age 18

As a general rule, no distributions may be made before January 1 of the calendar year in which the child turns 18. As a result, a Trump Account cannot be used for childhood expenses.

At age 18

• The Trump Account converts to a traditional IRA when the child turns 18, and the child gains full access and control.
• Distributions are permitted, but amounts that exceed basis will be subject to ordinary income tax, plus a 10% early withdrawal penalty for distributions before age 59½.
• The early-withdrawal penalty can be avoided by using funds for qualified education expenses, a first home purchase and other reasons permitted under traditional IRA rules.

After age 59½

Standard traditional IRA rules apply at age 59½, including:

• Withdrawals will be subject to ordinary income tax.
• Required minimum distributions (RMDs) — under current rules, a child would begin taking required withdrawals at age 75.

Tax considerations

Income tax treatment

• Unlike a traditional IRA, contributions to a Trump Account are not tax deductible and are made with after-tax dollars.
• However, earnings grow income tax-deferred.

Planning pointer: Once the Trump Account converts to a traditional IRA, the account could be converted to a Roth IRA, ideally when the child is in a low-income tax bracket — this would allow the account to grow tax-free, and future qualified withdrawals would not be subject to income tax.

Gift tax implications

• The federal gift tax annual exclusion allows an individual to give up to $19,000 per recipient per year (in 2026) without using any of their lifetime gift tax exemption ($15 million in 2026).
• Because Trump Account distributions are generally not available until age 18, the contributions technically do not qualify for the annual exclusion.
• The IRS has provided a safe harbor for contributions to qualify for the annual exclusion under limited circumstances. To meet the safe harbor, an individual contributor must satisfy all of the following:
  • The contributor’s only taxable gifts during the year are cash contributions to one or more Trump Accounts, each made before the calendar year in which the beneficiary turns 18.
  • The contributor’s total gifts to each beneficiary during the year, including Trump Account contributions, do not exceed the annual exclusion amount.
  • The contributions do not result in any transfer tax liability after applying remaining lifetime exemptions.
  • No gift tax return is otherwise filed or required to be filed by the contributor for that year.

Planning pointer: If you do not meet all of the requirements of the safe harbor, you will need to file a gift tax return to report any contribution to a Trump Account and the contribution to the Trump Account will use gift tax exemption (or will be taxable, if you have used all of your exemption). As a practical matter, many people will fall outside of the safe harbor, and caution should be taken before contributing to a Trump Account if you make any other gifts during a given year.

Is a Trump Account right for your family?

Trump Accounts can provide a meaningful boost to a child’s long-term financial future. However, they may not be the best fit for every family’s planning goals. Other strategies worth exploring include:

• 529 Plans for education-focused savings
• Custodial accounts for flexible investing and spending
• Trusts for more customized wealth transfer planning

We encourage you to consult with your estate planning attorney or tax advisor to design a gifting strategy that aligns with your financial objectives and priorities. For more information on Trump Accounts, please contact your CIBC advisor.

This post features contributions from Brian Hughes and Tom Matia, financial planners at CIBC Private Wealth.