MW The Treasury Department started Trump accounts for 60 million kids - but families still have to take this step if they want one

Andrew Keshner

Here's what parents seeking the $1,000 seed money for their child need to know

Treasury Secretary Scott Bessent called the automatic enrollment in Trump accounts a "transformative milestone."

The Treasury Department is taking a major step to get more kids invested in "Trump accounts."

On Thursday, Treasury Secretary Scott Bessent said his department automatically signed up more than 60 million children for the tax-deferred investing accounts.

It's a "transformative milestone," Bessent said in a statement. The mass enrollment effort could "give every American child the opportunity to build generational wealth and jump-start their financial future," he said.

But first, parents and guardians must take their own steps to claim the accounts and then build them up. While automatic enrollment starts a child's account, parents still have to claim the account to bring it to its full potential.

The Treasury Department's automatic enrollment will be a "significant expansion" in the number of kids with these accounts, said Melissa Elbert, a partner at the consulting firm Aon. "But the parents are still going to need to do some work."

The accounts, formally known as 530A accounts, are open to children under age 18 who have a Social Security number. Babies born between 2025 and 2028 are eligible for a free $1,000 in starter money. The accounts get stock-market exposure and the money must be invested in a low-cost index fund.

Following a July launch, families, employers and deep-pocketed philanthropists could start putting money in Trump accounts. That month, the federal government also started putting $1,000 in the accounts created for newborns.

In all those cases, households had to make the first move and establish an account before money could flow in. Families had to sign up their child through their 2025 income-tax return or through an IRS portal.

The Treasury Department's auto-enrollment is meant to streamline the process, but it also creates new questions for families. Here's what to know:

When does automatic enrollment start?

It already happened. The Treasury Department set up accounts for all eligible kids under age 18 with a Social Security number, who don't already have a Trump account.

Parents who already set up and activated accounts are not affected by the new rules, said Amber Salotto, managing director with RSM's Washington National Tax compensation and benefits practice.

At first, the automatically generated accounts will stay in a massive "group trust," where investment contributions are handled collectively. By building a large group trust, officials were able to avoid concerns about disclosing taxpayer's financial information of taxpayers in the everyday operations of the accounts.

The next step for parents and guardians is stepping forward to claim the automatically generated account.

The money accepted by the group trust comes from sources including government and charitable contributions, said Elbert. That includes the $6.25 billion donation from Michael and Susan Dell that will send $250 each to 250 million children 10 and younger who live in certain areas.

The group trust will also accept stock donations. Allowing the contributions to the group trust could pave the way for future big-time stock donations by companies and individuals, according to IRS regulations released earlier this week.

"The Treasury Department and the IRS have been informed that several eligible donors who would not otherwise make cash contributions are prepared to facilitate contributions of appreciated stock similar in magnitude to the general funding contribution" from the Dells, the regulations said.

How can I claim my child's Trump account?

Before parents and guardians can claim the account, they'll have to verify their identity and relationship to the child. Parents can start the process of claiming the account through the Trump accounts app, the Treasury Department said.

The money in the account is the child's property. If parents or legal guardians still don't claim the account as it grows over the years, Salotto said the child can claim it themselves when they get older.

Generally speaking, that's once they turn 18, but could be earlier in some cases. By that point, she noted, the accrued balance rolls over to an IRA, instead of another Trump account.

When does the $1,000 go into my child's Trump account?

The $1,000 in free money is a big lure for families of newborns. Even if they took the $1,000 and never added another cent to the account, the money could grow to approximately $5,000 in 18 years, according to one McKinsey & Co. estimate.

To get the $1,000 added to your child's account, however, families have to claim the account, according to Elbert.

The $1,000 is technically an election and even though Treasury officials are auto-enrolling children, they can't take it on themselves to make the election, Salotto noted. It also means family and employers can't put money in the account until it's claimed, Salotto added.

This year, the maximum contribution to a Trump account is $5,000. Employers can contribute up to $2,500.

Though some businesses have announced plans to start putting money in the accounts of workers, many are still determining their next steps, said Elbert.

Recent proposed Treasury rules allowed employee pre-tax contributions to Trump accounts. The new auto-enrollment features may nudge more businesses to explain the accounts to staff, said Elbert, even if management isn't planning its own contributions.

Donors receive no tax deduction for contributions to accounts. Yet employees would be allowed to put up to $2,500 of pre-tax money into their children's accounts. If businesses allow pre-tax contributions through their benefit plans, financial advisers say it could be a smart giving strategy for workers who want to give to Trump accounts.

How many children have been signed up for Trump accounts?

As of late July, there were approximately 7 million Trump account sign-ups, including 1.7 million babies who are eligible for the seed money.

Many more children appear to be eligible for the accounts: An estimated 72 million children under age 18 live in the U.S., according to the Census Bureau. Approximately 3.6 million babies were born in the country last year, according to the Centers for Disease Control and Prevention.

The accounts may give kids an early start on building wealth and could help with a more tax-efficient retirement. But polling still shows a participation gap. More than half of eligible families knew of Trump accounts according to Commonwealth, a nonprofit focused on financial security. Yet just 5% of eligible parents with children 10 or under had opened an account, their polling showed.