OPINION:
The name “Trump Accounts” may sound casual, but these new accounts represent a serious effort to help young Americans enter adulthood with a clear stake in the country’s economic future.
If successful, they could demonstrate to the next generation that the private sector is the engine that drives wealth creation and enhanced living standards, and that personal savings are the most surefire source of opportunity and financial security.
Trump Accounts are essentially individual retirement accounts established for children. They were enacted in the One Big Beautiful Bill Act in July, and they will officially launch this July 4.
The Treasury Department will seed $1,000 into the Trump Accounts of babies born from 2025 to 2028, but parents of all children younger than 18 are encouraged to open accounts (via IRS Form 4547).
Up to $5,000 per year can be contributed to each child’s Trump Account, including up to $2,500 that can be provided pre-tax by employers. Money invested in accounts must track the S&P 500 or another well-diversified equity index.
The success of Trump Accounts will hinge on whether most of the funds ultimately come from the federal government or from private contributions. The accounts must be viewed by people — parents, grandparents, employers and philanthropists — as a viable tool for investing in the next generation.
To that end, Congress should allow philanthropists to increase their death tax exemption when they give directly to the accounts of unrelated children in their communities or states or across the country.
This could help ensure that Trump Accounts attract donations from major philanthropists. It would encourage wealthy Americans to follow the example of Michael and Susan Dell, who pledged to donate a staggering $6.25 billion to the Trump Accounts of communities across the country through their Michael and Susan Dell Foundation.
The Dells’ gift will be split among 25 million children younger than 11 in ZIP codes with median household incomes of less than $150,000, providing each with a $250 head start in life. If the stock market achieves its historical average return, then those $250 donations could reach $1,000 within 18 years and more than $40,000 by retirement age.
This will show children the power of investment and compound interest while providing a solid start in saving for retirement.
Currently, there is no tax advantage for individuals or estates to give directly to Trump Accounts. Philanthropists’ giving to Trump Accounts makes tax sense only when, like the Dells’ contribution, it is made through a foundation or a donor-advised fund.
Individuals can give to a foundation, receive a 37% federal charitable deduction and then the foundation can fund children’s Trump Accounts. Still, a wealthy individual or estate shouldn’t have to set up a foundation to make a generous gift to a Trump Account.
Congress could establish near parity between charitable giving and donations to Trump Accounts by allowing an increase in the death tax exemption equal to 55.5% of contributions to children’s accounts.
Donating $1 billion to Trump Accounts would enable a philanthropist to exempt an additional $555 million in assets from the 40% death tax, resulting in about $222 million less in death taxes paid.
After factoring in interactions between the death tax and the income tax (which affects inheritable wealth and thus death tax liability), an exemption increase of 55.5% of the donation would offset a comparable amount as the federal income tax deduction for charitable giving.
Unlike charitable deductions for giving to foundations, which are subject to annual income-based limitations, there should be no cap on how much one’s death tax exemption can be raised by donating to Trump Accounts. If someone wants to give $100 billion to children’s accounts across the country when he dies — well, that’s a great way of giving back.
Ultimately, Trump Accounts will prove successful if they become a tool that gives people, not the government, more autonomy. Pairing donations with a higher death tax exemption would make it easier for charitable Americans to invest directly in children across the country, including their own communities.
It also would help the next generation get started saving, investing and building their own wealth.
• Preston Brashers is a research fellow with the Plymouth Institute at Advancing American Freedom.
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