How Long-term Thinkers Might Use Trump Accounts

On July 4, 2026, a new type of investment account became available. While there is an IRS code section (code section 530A) that regulates them, they are being referred to as Trump Accounts. In practice, they are a retirement account that can be contributed to for the benefit of a minor. Funds should grow over time in a tax-deferred manner with no option for withdrawal until age 18, when the account is automatically converted into a traditional IRA.

While many are celebrating this newfound access to the stock market for the next generation, I’d like to explore a different angle: the newfound tax strategies for savvy long-term thinkers looking to benefit future generations.

Sometimes deferring taxes stinks, especially as assets grow. However, in this case, it helps avoid tax issues with the “kiddie tax” as a result of minors making too much investment income. Certainly, while it would be nice to just pay the taxes today and enjoy the benefits of tax-free growth like a Roth IRA, that isn’t so.

Not all is lost, however. Remember that traditional IRA funds are eligible for a conversion to Roth IRA funds by electing to pay taxes in the present. Income is realized, thus taxed, but no penalties are assessed.

So a key part of this concept is that this new Trump Account, which can receive $5,000 per year in contributions (without even having earned income!), can now grow, and it will eventually become a traditional IRA as the child turns 18. So here is the question: When are a person’s lowest-income-earning years? I’d argue probably right at the beginning. This presents an opportunity to execute massive Roth conversions on that traditional IRA at a time that is still both early in life and likely in very low income tax brackets.

Performing this strategy could significantly help children or grandchildren get ahead. After a Roth conversion, these retirement funds can grow tax-free and provide valuable tax flexibility later in life. Even more importantly, they may substantially reduce—or even eliminate—the need for the child to save for retirement from future earnings, freeing that money for other financial priorities: funding the down payment on a home, making a mortgage payment easier, or helping cover the costs associated with raising their own children someday.

Be advised there are a lot of ways for this to go wrong. There are proper tax reporting requirements and records that need to be kept. There are additional advanced strategies to enhance tax savings for some, even. Most importantly, though, this plan is most susceptible to execution risk.

Remember, this account legally becomes the child’s property at age 18. At that point, you cannot prevent access to the money, nor can you help manage or use the funds without the child first realizing that the account is entirely his or hers to control. Play this wrong, and you could be handing over the keys to tens or hundreds of thousands of dollars to an 18-year-old.

Having once been 18 myself, I recommend that turning over the keys to such assets (which will be out of your control) come with a significant amount of preparation, training, and guidance. In all, for those with the capacity to gift money to a younger generation, you may now be able to significantly change the trajectory of their financial lives. The ultimate outcome is far more likely to be determined by intentionality, behavior, and discipline than by faith or market performance.