The Treasury Department recently introduced automatic enrollment for eligible children into Trump Accounts, a new tax-advantaged investment account created under Section 530A of the Internal Revenue Code.
As a result, many children may already have a Trump Account, even if a parent or guardian did not actively establish one.
Trump Account Basics
Trump Accounts are designed to help children begin saving and investing at an early age. Contributions may come from parents, grandparents, employers, charitable organizations, and certain government programs.
The accounts are intended for long-term investing and operate more like retirement accounts than traditional savings accounts.
See our previous blog post on these accounts here: Understanding the New Trump Accounts for Kids
New Trump Account Auto-Enrollment Rules
Previously, a parent or guardian generally needed to establish a Trump Account for an eligible child. Under the Treasury Department’s new guidance, accounts may now be automatically created for eligible children under age 18 with valid Social Security numbers.
Auto-enrollment is intended to expand participation and give more children access to government, employer, family, and charitable contributions.
Claiming a Trump Account
Although a Trump Account may be created automatically, a parent or guardian must claim it before managing the account, selecting investments, or allowing others to contribute.
Parents and guardians can begin the process through the official Trump Accounts website.
Claiming the account is also important for families seeking to receive government or other outside contributions for an eligible child.
The Bottom Line
Trump Account auto-enrollment could give millions of children an earlier start on long-term investing. However, parents still need to claim the account, confirm whether their child qualifies for the federal contribution (or other donor contributions), and determine whether making additional contributions fits within the family’s broader financial plan. Parents should also check with their employers to see whether they intend to incorporate Trump Accounts into their employee benefits programs, either by making employer contributions or by allowing employees to make pre-tax contributions to their children’s Trump Accounts.
A Trump Account can be a valuable planning tool, but it should be evaluated alongside 529 plans, custodial accounts, retirement savings, and other financial priorities.
