‘more unanswered questions than answered,’ expert says

On the heels of a massive publicity push, more than 1 million people have signed up for Trump accounts, according to a post by the White House on X — well ahead of the July launch date.

The “free money” is likely a major incentive. The federal government has said it will make a one-time $1,000 contribution into the accounts of all eligible children born on or after Jan. 1, 2025, through Dec. 31, 2028. A growing number of companies have pledged to match the Treasury’s deposit for children of employees, and philanthropists in multiple states have committed to seed the accounts of certain qualifying families.

“The president has called on business leaders and philanthropists all around the country to get involved in the initiative,” Treasury Secretary Scott Bessent said Friday during a speech at the Economic Club of Dallas.

And yet, beyond the initial deposits, plenty of questions remain about how these accounts will be managed and invested.

“There are more unanswered questions than answered at this point,” said Mary Morris, CEO of Commonwealth Savers, the agency that administers the national Invest529 program. A 529 college savings plan is another tax-advantaged investment option for families to save on a kid’s behalf.

“There is a lot of good stuff there, but there are still a lot of unknowns about how it’s going to work,” Morris said.

For starters, it’s not entirely clear how Trump account applications will be verified.

To set up a Trump account — also known as a 530A account — parents or guardians must file IRS Form 4547 with their 2025 tax returns or via TrumpAccounts.gov. Then there is an “authentication process,” which is expected to begin sometime in May. Although there are no details yet on what that will entail, the federal government’s seed funding is expected to arrive on July 4, according to the White House.

The Trump account site shows the mockup of a yet-to-be-released app interface tracking gains of select stocks. However, Treasury guidance says Trump accounts will be invested in “broad U.S. equity index funds,” such as mutual or exchange-traded funds — not individual stocks like Nvidia.

“It’s a clever way of selling them by capitalizing on some of the trendier stocks — trying to juice the investing,” said Ben Henry-Moreland, senior financial planning nerd for advisor platform Kitces.com. The exact investment options have not been announced.

While there are benefits to the “100% equities investment options,” a recent Vanguard research note points out that Trump accounts “don’t gradually de-risk toward a bond allocation” like other account types, such as 529s. Those generally start off with more equity exposure early on and then become more conservative over time as the target date for tapping the money approaches.

When U.S. stock markets open on Monday, July 6, the post-holiday trading week could potentially kick off with more than 3.5 million accounts pre-funded with the $1,000 grant for newborns, based roughly on the number of babies born in a year, according to CDC data.

If every one of those accounts were hypothetically funded with another $1,000 employer match and a family contribution of $500, the market would experience an inflow of as much as $8.75 billion, according to Christopher Mistal, director of research at the Stock Trader’s Almanac.

Still, that is just 1.7% of the market’s average daily activity and far less than the significant capital inflows that resulted from the Federal Reserve’s bond-buying program, known as quantitative easing, Mistal told CNBC.

“Less participation, and/or fewer accounts funded, further reduces the percentage,” he wrote in a follow-up email. If the program rolled out over several trading sessions, it would further dilute the market impact, he added.

“At best, with high participation and funding, Trump accounts could have a modest, yet difficult to measure, bullish impact during an already historically bullish period,” Mistal said of the typical timing of a mid-year rally in July.

Matt Lira, co-founder of Invest America, the nonprofit advocacy group behind Trump accounts, told CNBC in an interview that “even if you transacted all of the funds of the children in a single day, in a single trade, it would still be a relatively small percentage of the overall market trading volume for that day.”

Invest America also paid for the Trump account Super Bowl commercial and has been promoting the new investment accounts for children.

Although the Treasury says Trump accounts will be held with a “designated financial agent,” the identity of which has not been publicly announced yet.

“Right now, my main questions are operational: Who are going to be the custodians?” said Henry-Moreland.

The custodian of the account will likely need to track the beneficiary’s basis, or the non-taxable portion of the account, and subsequent earnings, which are taxable.

Plus, investors may need to consider any custodian fees that could reduce returns, Zach Teutsch, founder and managing partner at Values Added Financial in Washington, D.C, previously told CNBC. Teutsch is a member of CNBC’s Financial Advisor Council.

Another potential sticking point is the gift tax return filing requirement. Since parents, guardians, grandparents and others can contribute up to $5,000 a year in after-tax dollars to Trump accounts, experts say it is possible they may have to file a gift tax return, even if the total amount they’ve gifted is below the annual exclusion amount. For 2026, the annual exclusion for gifts is $19,000 per recipient. 

To qualify for the annual exclusion, gifts must be “present interest,” with immediate recipient access. Some financial advisors question whether Trump account gifts meet that criteria, which could trigger gift tax return filing requirements.

Lira with Invest America told CNBC that the Treasury Department is “aware of the issue” around possible gift tax return filing. “They’re tracking that issue very closely,” he said.

The Treasury will “continue to issue guidance on those questions going forward,” Lira said.

Exactly how distributions — including contributions made by parents, qualifying charitable organizations and the government — will be taxed down the road is another issue the IRS will have to clarify later. 

To be sure, Trump account investors should plan for future taxes on withdrawals, experts say.

“These accounts behave like [individual retirement accounts],” said certified financial planner Marianela Collado, CEO of Tobias Financial Advisors in Plantation, Florida. Your pretax funds are subject to regular income taxes at withdrawal, she said. 

Plus, taking out funds before age 59½ could trigger a 10% penalty, with some exceptions, said Collado, who is also a certified public accountant and a member of CNBC’s Financial Advisor Council.   

You’ll need records of your pre-tax vs. after-tax Trump account contributions to calculate taxes for future withdrawals, she said. 

Trump account funds grow tax-deferred until withdrawal. There’s no upfront tax break for after-tax contributions, but earnings are subject to taxes upon withdrawal. Meanwhile, pre-tax contributions are excluded from income, but you’ll owe future taxes on the contribution plus future growth.  

Here’s a breakdown: 

Direct parent contributions — after-tax Pilot program $1,000 — pre-tax  Employer contributions — pre-tax Other qualified contributions — pre-taxFuture contribution growth — pre-tax

If you don’t track after-tax funds, you could pay regular income taxes on full future Trump account withdrawals, experts say.   

Lira with Invest America told CNBC that long-term tracking of Trump account fund sources and the future tax treatment is “clearly something that’s of concern and consideration for the financial institutions.” 

“Our conversations with those financial institutions have indicated that there are solutions for tracking … information over the lifespan of the account,” he said.

For now, financial advisors generally recommend that families who qualify for any “free money” open a Trump account and then decide whether to add additional funds once all of the information is available.