Federal Child Savings Accounts

Brand new this year, 530A Accounts (also known as “Trump Accounts”) are an innovative tool for families considering options for their kids’ financial futures and potential estate planning moves for themselves. These tax-deferred savings accounts are designed specifically for children under 18.

Under the current framework, a guardian, parent, adult sibling, or grandparent can open a 530A Account for a child, but after that, anyone can contribute – friends, employers, even charities. Plus, for babies born from 2025 through 2028, the federal government will deposit $1,000 into each eligible child’s account. The account grows tax-deferred, and once the child turns 18, it converts to an IRA.

530A Accounts can also benefit adults, particularly those who have a taxable estate. The accounts can serve as a way for grandparents, parents, and others to pass down wealth, whether for the first time or to augment an existing gifting program. Instead of waiting to leave inheritances, contributors can gift money to a child’s account now and watch the funds to grow over time. The potential for compounding growth is huge, especially if the adult child elects to retain the IRA and continue to fund it till retirement age.

Government contributions begin after July 4, 2026. As with any new legislation, details on implementation, eligibility, contribution limits, and tax treatment may evolve. For now, funds are generally locked until age 18. Early withdrawals may incur penalties, and post-18 withdrawals are taxed as ordinary income. Families should compare these accounts with alternatives—such as 529 plans, UTMA custodial accounts, or custodial IRAs for children who have earned income—and consider that outcomes depend on contributions beyond the initial deposit, interest rate fluctuations, investment performance, and fees.

In short, 530A Accounts offer tax advantages and a unique long-term savings opportunity. They are worth considering if you are exploring your options to set up the next generation for financial success.