A recent New York Times article advises that the new Trump Accounts, formally Section 530A accounts, are worth opening primarily to capture free government and philanthropic seed money. The IRS reports in IR-2026-129 that nearly 70 million accounts are open, and 27 million have received funds. The seed money is real: the federal government deposits $1,000 for each child born from 2025 through 2028. Clients are asking whether to fund these accounts for children and grandchildren. From an elder law and estate planning perspective, the more important questions are who controls the account and what happens when someone dies.

The Account Belongs to the Child

Under Revenue Procedure 2026-25, a Trump Account is a traditional IRA established for an eligible child, and the child is treated as its owner. Parents or guardians act as custodians until the child turns 18. Distributions are generally barred until January 1 of the year the child turns 18, and contributions are not deductible. Under § 530A, contributions other than the exempt ones, such as the federal seed deposit and certain charitable contributions, are capped at $5,000 a year. That limit is aggregate: it applies to all non-exempt contributions to the child's single account combined, whoever makes them, and it is not a per-donor limit. Parents, grandparents, aunts, uncles, and friends share one $5,000 allowance.

This is the opposite of a 529 plan, and the difference drives everything below. A grandparent who opens a 529 plan owns it, keeps control, can change the beneficiary, and can name a successor owner. A grandparent who contributes to a child's Trump Account makes a completed gift to the child and keeps nothing: no control, no ability to take it back, and no successor owner to name.

Who May Open the Account, and Where Grandparents Fit

A grandparent usually cannot open the account. Under the proposed regulations, the person who may make the election to open, or claim, an account follows a priority order: generally a legal guardian first, then a parent, then an adult sibling, then a grandparent, with limited additional options in some circumstances, such as certain child-welfare agencies. A grandparent generally cannot open or claim an account if a higher-priority person, a parent or guardian, is available. That is not a technicality. For a grandchild born before 2025, the election includes a sworn statement that no higher-priority person is available, and the guidance does not define "available." A grandparent who signs it carelessly risks an invalid election and a false statement made under penalty of perjury.

Once the account exists, the rules are friendlier. Grandparents, other relatives, employers, and philanthropic sources may contribute, subject to the annual limit, but they do not open a second account. Treasury has also implemented automatic enrollment for many eligible children, so a parent or guardian typically claims and activates the auto-created account. That means the practical advice to a grandparent is usually to ask the parents whether an account already exists and to contribute to it, not to open one. Because the temporary regulations issued September 30 replaced the earlier proposals, confirm the current priority rules before anyone signs an election.

Quick Comparison: 529 Plans and 530A Accounts

529 plans remain the superior dedicated education savings tool for most families. A 530A account functions more like a starter retirement account for a child:
  • Tax Treatment: A 529 plan offers tax-free growth and tax-free withdrawals for qualified education expenses. A 530A account is a traditional, not Roth, IRA. Growth is tax-deferred, but withdrawals are taxed under IRA rules, and the account is not tailored to education expenses.
  • Main Attractions: The main current attractions of a 530A account are the $1,000 federal seed deposit for children born 2025 through 2028 and additional philanthropic contributions. A 529 plan offers no seed deposit, but it is built for the goal most families actually have.
  • Contribution Limits: 529 plans allow high contributions. Contributions to a 530A account are limited to $5,000 a year in the aggregate from all non-exempt sources, indexed after 2027.
  • Flexibility: A 529 owner can change the beneficiary and decide when and how the money is used. A 530A account is tied to the one child it was opened for.
  • Who Owns It: A 529 plan belongs to whoever opens it, so a grandparent or parent keeps control. A 530A account belongs to the child, and the grandparent has no control.
  • Estate Planning Coordination: A 529 plan offers stronger protection and planning options when coordinated with trusts and successor-owner designations. A 530A account cannot be held in a trust and has no successor owner, because the child is the owner.
In short, take the free seed money, but do not let it displace a 529 plan for a family whose goal is education, or for a grandparent who wants to keep control of the money.

Gift Tax and the Safe Harbor

Revenue Procedure 2026-25 gives donors a safe harbor. Qualifying cash contributions made before the child turns 18 are treated as completed gifts that are not gifts of future interests, so the annual exclusion applies ($19,000 per recipient for 2026). The total of everything a donor gives that child in the year must stay within the exclusion, and the donor must not file a Form 709 for the year for any purpose. A grandparent who also funds a 529 plan or pays tuition directly needs to count the account contribution along with every other gift to the same grandchild.

What Happens When Someone Dies

  • If the Person Who Contributed Dies: Nothing happens to the account, because the gift was complete. The account does not depend on the person's will or trust, and there is nothing to retitle or leave to anyone. That simplicity is a benefit, but it also means the donor has no way to protect the money if the family's circumstances change.
  • If the Child Dies Before the Year the Child Turns 18: Under § 530A(d)(6), the account stops being a Trump Account, and the distribution restriction no longer applies. The fair market value, less the child's basis, is taxed as ordinary income to the person who receives it, or to the child's final return if the estate receives it. Basis excludes the federal seed deposit and charitable contributions, so those dollars are fully taxable. I could not find clear guidance on who may sign a beneficiary designation for a young child or what the default is if none is made. The responsible party manages certain administrative matters during the growth period, but death-benefit designations appear to be left to the custodian’s account agreement and ordinary IRA rules once the account ceases to be a Trump Account. Ask the trustee before assuming anything.
  • If a Parent Dies: The account is the child's, but a minor needs an adult to act for the child. There does not appear to be an automatic successor-custodian rule comparable to some state UTMA statutes, so the practical protection is the guardian nomination in the parents' plan. Parents should name a guardian for minor children, and the family should plan for someone to manage the account and stay on top of its reporting.
  • After the Child Turns 18: The account becomes the child's own traditional IRA, and an eighteen-year-old controls it. No trustee or successor owner stands between the child and the money. Ordinary IRA rules apply, including the 10 percent additional tax on early distributions unless an exception applies, taxation of withdrawals that includes any basis (the distribution rules apply to a Trump Account separately from the child's other IRAs), and, eventually, required minimum distributions. Whether a particular grandchild should have that control is a family question to settle before the contribution, not after.

The rules are still moving. Treasury and the IRS issued temporary regulations on September 30, 2026, together with related proposed rules. They address how accounts are established, automatic enrollment, and qualified general contributions, and comments are due November 30, 2026. Administration details and beneficiary designations can still change, so confirm the current rules before relying on any of this.

Special Needs and Disability Benefits

For a grandchild who receives, or may later receive, SSI, the account needs planning. SSA's POMS instruction SI 01120.250, as summarized by Empire Justice, excludes the account from income and resources until January 1 of the year the child turns 18. After that, it can count. The statute allows a tax-free transfer of the entire balance to an ABLE account in the calendar year the child turns 17. Because the child owns the account, a special needs trust cannot hold a Trump Account, so a family with a disabled grandchild should treat these accounts as a bridge to an ABLE account and calendar the transfer.

The Elder Law Issue Most Articles Skip

A grandparent's contribution is a gift. For a client who may need long-term care within five years, it is a transfer for less than fair market value that can matter under the Medicaid look-back, even if it comes within the gift tax exclusion. A well-documented, modest annual gift may be reasonable for a healthy client. For a client with declining health, weigh the same gift against the client's care plan, not because seed money is available.

What Clients Should Consider

  • Decide Who Gets Control: If a grandchild is not ready to control an IRA at 18, a 529 plan that the grandparent owns, or a trust, may fit better than a Trump Account.
  • Keep the Gifts Within the Safe Harbor: Contribute cash, count every gift to that grandchild for the year, and avoid filing a Form 709 where the safe harbor applies.
  • Coordinate With Guardianship Nominations: Parents should name guardians for minor children so that someone has clear authority over the child's accounts.
  • Plan for Disability Benefits: If SSI is a possibility, calendar the ABLE transfer for the year the child turns 17.
  • Check the Long-Term Care Picture: Before an older client gives anything, look at the client's own health, the look-back, and the care plan.
  • Do Not Promise Creditor Protection: Section 530A does not create any special federal creditor protection for these accounts, so do not assume a child's account is shielded from creditors.  State law governs general creditors' reach.
Conclusion

Take the free seed money, and understand what you are accepting. A Trump Account is a child's IRA, not a parent or grandparent's estate planning tool. It works as a modest supplement. It does not replace a 529 plan, and for a grandparent who wants to keep control, it is not a substitute. Decide whether to fund it with the whole plan in view: the donor's circumstances, the family's guardianship nominations, and the donor's own care.

Published November 9, 2026 in the Aging in Place Planning and Elderlaw Blog. This article is general information, not legal advice; see our disclaimer.

Schedule a consultation