Trump accounts are getting more complicated, and two recent developments could have significant implications for parents and grandparents hoping to build savings for their children.
The federal government is moving to automatically establish accounts for eligible children, but families may still need to take action to receive the $1,000 federal seed contribution. Meanwhile, new guidance could allow companies to contribute individual stocks to accounts originally designed to invest exclusively in low-cost index funds.
In an interview with me, Jeff Levine, chief planning officer at Focus Partners, explains what has changed, why automatic enrollment doesn’t necessarily mean a family can access all the account’s benefits, and what parents and grandparents need to know about the new investment rules.
The following interview was edited for brevity and clarity.
Why doesn’t automatic enrollment mean your child’s Trump account is ready to use?
Bob Powell: Jeff, the government may automatically establish a Trump account for your child, but that doesn’t mean you’ve received all the benefits. What’s changed, and what do families still need to do?
Jeff Levine: The federal government has decided to automatically enroll pretty much anyone it can identify as qualifying for one of these accounts.
There have been generous contributions made by individuals and organizations, but not everybody is establishing a Trump account. The question was whether those children would miss out.
The administration decided to automatically establish accounts for eligible children it can identify. That allows charitable contributions, such as those from the Dell family, to go into an account for the child.
But there’s an important distinction. You still have to claim the account to access it.
What happens to the $1,000 federal contribution if you don’t claim the account?
Powell: So what happens if parents assume the government has already taken care of everything?
Levine: If you haven’t claimed your account yet, you don’t get the $1,000 federal seed contribution. You can’t make your own contributions, and there are other restrictions.
There will be a shell account where charitable contributions that your child or grandchild qualifies for can be deposited.
These were supposed to be really simple, straightforward accounts, and they’ve gotten progressively more complicated over the last year or so.
But to access the account, you still have to go through a process similar to what families who established their own accounts went through. Now it’s a matter of claiming the account.
Why could automatic enrollment help families who need the money most?
Powell: Is automatic enrollment a positive development, even with those restrictions?
Levine: Overall, I think it’s a relatively positive step because not everybody is going to be aware of these accounts.
Typically, it’s the people who have the greatest means who end up getting that information, and they may need those dollars the least.
Absent automatic enrollment, they may have been the only ones to get it.
How can Trump accounts hold individual company stocks if they’re supposed to invest in index funds?
Powell: There’s another change that may surprise families. Trump accounts were supposed to invest in low-cost index funds. How can individual company stocks now end up in these accounts?
Levine: These were supposed to be really simple, straightforward accounts, and they’ve gotten progressively more complicated over the last year or so.
By law, Trump accounts were set up to invest in super-low-cost index funds. But a lot of companies wanted to contribute their own stock to these accounts.
The administration took what you might call a fairly liberal approach to interpreting the law.
Essentially, the interpretation is that the law restricts what Trump accounts can purchase, but not necessarily what they can hold.
That allows companies to allocate shares to charitable organizations that ultimately fund Trump accounts or work with the Treasury to contribute shares.
Can families sell company stock contributed to a Trump account?
Powell: If a company contributes its own shares, can the family sell those shares and invest the proceeds in an index fund?
Levine: What’s interesting is that those stocks, it looks like at least, will not be able to be sold until the child reaches age 18.
So they may have to hold on to those shares for the foreseeable future.
That means you may suddenly find company stock inside your Trump account and wonder how it got there, given the original investment restrictions.
Well, nobody knew these accounts could hold individual company stock until recently.
How much can families contribute to Trump accounts each year?
Powell: For parents and grandparents who are just learning about these accounts, remind us how the basic contribution and tax rules work.
Levine: These accounts were created by the One Big Beautiful Bill Act.
Individuals can contribute up to $5,000 a year. There’s no tax deduction for contributions made by parents, grandparents or other family members.
But the money grows tax-deferred. At age 18, the account essentially becomes an IRA.
It’s an interesting way to get a young person started saving for retirement.
What should parents and grandparents watch for next?
Powell: With automatic enrollment and new rules for company stock, are there likely to be more changes?
Levine: It seems like every month we’ve gotten new guidance about these accounts.
If the question is what’s the latest with Trump accounts, you could probably ask it every month, and at least for the foreseeable future, there will be something new.
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