What Minnesota families need to know about Trump accounts

On July 4, a new kind of savings account for children opened nationwide. They are called Trump accounts, and if you have young kids or a baby on the way, you have probably seen the headlines and the confusion in equal measure. Here is what the accounts actually do, who gets the free money, and how to think about them next to the accounts you may already have.

Start with the basics. A Trump account is a tax-advantaged investment account for a child under 18, opened through an election that a parent or guardian generally makes. The law behind it includes a pilot program with real money attached. Children who are US citizens born between 2025 and 2028 receive a one-time $1,000 contribution from the federal government. The IRS reports that millions of children have already been signed up. If your child qualifies, the seed money costs your family nothing.

Beyond the seed, families and others can contribute up to $5,000 a year until the year the child turns 18, and the $1,000 pilot contribution does not count against that limit. Contributions became possible on July 4 of this year.

The investment rules are strict on purpose

Until the child turns 18, the money must sit in low-cost mutual funds or exchange-traded funds that track the S&P 500 or another index made up almost entirely of US companies, with fund expenses capped at a tenth of a percent. No stock picking, no leverage, no exotic products. Whatever you think of the name on the account, the required investments are the kind most advisors would call sensible for a multi-decade timeline.

What happens at 18 might surprise you

The part that surprises people is what happens at 18. Beginning January 1 of the year the child turns 18, the account is generally treated like a traditional IRA. Money generally cannot come out before then. After that, earnings, the $1,000 seed and any employer money are taxed as ordinary income when withdrawn, while family contributions come back tax-free. Withdrawals before age 59 and a half can carry a 10 percent penalty, with the usual IRA exceptions. In other words, a Trump account is not a college fund with a new name. It is closer to a retirement head start for your child.

A Trump account is not a college fund with a new name. It is closer to a retirement head start for your child.

Do not forget the employer angle

There is one more contributor many families overlook, the employer. As of July 4, an employer can put up to $2,500 a year, per employee rather than per child, into a Trump account for an employee or an employee's dependent. The business deducts it, and the employee pays no income tax on it when it goes in, which makes the same dollars go further than a raise. Two catches. The amount counts within the account's $5,000 annual limit, and the exclusion only works through a written Trump account contribution program with nondiscrimination rules, which the IRS spelled out in proposed regulations in August 2026, so the benefit cannot be set up to favor owners and highly paid staff. If you are an employee, it is worth asking whether your company plans to offer one. If you own a business, it is a new and inexpensive line for the benefits conversation, and setting it up correctly matters.

Trump account vs. 529 plan

That distinction matters when you compare it to a 529 plan. A 529 grows tax-free and comes out tax-free for qualified education costs, and Minnesota families may also get a state tax benefit for contributing. If you are reasonably confident your child will have education expenses, a 529 usually does more per dollar for that goal. The two accounts answer different questions. The 529 asks how you will pay for school. The Trump account asks what your child's money life looks like at 30 and beyond.

What a Minnesota parent should actually do

So what should a Minnesota parent actually do? First, if your child was born in 2025 or arrives before the end of 2028, claim the $1,000. It is free, and declining it helps no one. Second, decide about additional contributions deliberately rather than by default. For most families the order still runs emergency savings first, your own retirement next, then education, then extras like this. Third, ask about the employer side, whether that means raising it with your own employer or, if you own a business, considering the program for your team.

Every family's answer is different, which is the honest reason no article can finish this for you. We built a one-page summary of the rules that you can download below, and if you want to talk through where a Trump account fits for your kids, a short call is easy to book.

This material is for informational purposes only and is not investment, tax, or legal advice. E-Wealth Partners is a registered investment adviser. Rules described here reflect federal law and IRS guidance, including regulations proposed in August 2026, as of October 2026 and may change.