Turn a Trump Account Into a Tax-Free Nest Egg

Want to build a solid tax-advantaged foundation for a child or grandchild? Here's a strategy that uses a child's Trump account and may be worth discussing with your tax and financial professionals.

THE CONCEPT

Your contributions to the child's account aren't tax-deductible. However, contributions you or others make grow tax-deferred, which can provide a substantial investment advantage. The strategy is designed to capitalize on tax-deferred growth to support your family's long-term goals. Each year, maximize your contributions within the allowed limits. The limits for 2026 and 2027 are $5,000.

While the child owns the account, you manage it until they turn 18. After that, all contributions and earnings made before age 18 are treated as traditional IRA contributions and are subject to a 10% early-withdrawal penalty. These balances can also be rolled over into a Roth IRA.

THE TWIST

A series of well-planned Roth conversions is the twist. For many young adults, the year they turn 18 is an especially good time to begin converting the account to a Roth IRA. As long as the young adult’s total income—earnings plus the converted amount—is within the 0% tax bracket, no federal income tax will be owed. During the college years, similar partial conversions could also be untaxed. After that, the child could convert the remaining balance and pay the corresponding tax in the tax year the conversion is completed. Alternatively, they could continue partial rollovers until the entire balance has been converted, potentially paying less tax overall.

BENEFITS

Contributing early, during low-income years, secures decades of tax-free growth—a lasting tax advantage. Contributions to a Roth IRA, including those in a Trump account established in your child’s early years, may be withdrawn tax- and penalty-free before retirement. Your child can later use those funds to buy a home or start a business.