Trump Accounts: Clarification of the Federal Gift and Generation Skipping Transfer Tax Treatment and Reporting Requirements
More fully discussed in An Introduction to Trump Accounts and the Contribution Pilot Program, “Trump accounts” are a new type of traditional individual retirement account (IRA) created through the enactment of the One Big Beautiful Bill Act (OBBBA) that are specifically designed to enable families to build financial security for their children.[1] A parent or guardian can establish a Trump account for each of their minor children by filing IRS Form 4547.
Among several other sources of contributions, beginning July 4, 2026, gifts can be made to minors by contributing to a Trump account established for their benefit. In an attempt to reduce the reporting requirements that would otherwise be imposed on those making these gift contributions to Trump accounts, the IRS has recently issued guidance clarifying the Federal gift tax and Federal generation-skipping transfer tax treatment and associated reporting requirements.
Federal Gift and Generation-Skipping Transfer Tax Treatment and Reporting Requirements of Gift Contributions to Trump Accounts:
As background, the Federal gift tax is imposed on certain gratuitous transfers made during life. For 2026, each individual has a unified estate and gift tax exemption of $15,000,000, meaning that taxable lifetime gifts generally reduce the amount available to shelter transfers at death. In addition, a donor may make annual exclusion gifts of up to $19,000 per donee in 2026 without using any portion of the unified exemption, provided the gift is of a “present interest.”[2] The Federal generation-skipping transfer (GST) tax is a separate transfer tax that applies to certain gratuitous generation-skipping transfers made during life, which include transfers to grandchildren or more remote descendants. For 2026, each individual has a $15,000,000 GST exemption that may be allocated to transfers that would otherwise be subject to GST tax, allowing those transfers to pass free of GST tax to the extent of the exemption. In addition, certain gifts may qualify for the GST annual exclusion if they also qualify for the annual gift tax exclusion. Gifts that do not fully qualify for the gift tax and GST tax annual exclusion (if applicable) must be disclosed on IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, which must be filed by the donor for the calendar year in which the transfer is made.
Generally, for Federal gift tax purposes, contributions made to a Trump account are not considered gifts of a present interest because the beneficiary cannot withdraw any funds from the account until age 18, and thus do not qualify for the annual gift tax exclusion. Thus, contributions to minors through a Trump account are generally reportable gifts subject to the Federal gift tax (and, if a generation-skipping transfer, the Federal GST tax) for which a Form 709 must be filed for the calendar year in which the transfer is made, regardless of amount contributed per donee. However, in Revenue Procedure 2026-25, the IRS has established a safe harbor under which certain contributions to Trump accounts will be considered gifts of a present interest that qualify for both the annual gift tax and GST tax exclusion and for which the donor will not be required to file a Form 709 to report the transfers.[3]
To satisfy the safe harbor, the donor must be an individual whose only taxable gifts during the year are cash contributions to Trump accounts made before the calendar year in which the beneficiaries of the accounts turn age 18. In addition, the taxpayer’s total gifts during the year to each individual who is an account beneficiary, including gifts to their Trump account, do not exceed the annual gift tax exclusion amount per donee. A third requirement is that, if the Trump account contributions were considered reportable future interest gifts not eligible for the annual gift or GST tax exclusion, the Trump account contributions made by the donor during the year would be fully shielded by the donor’s remaining unified estate and gift tax exemption and remaining GST exemption, if applicable. A fourth (and important) requirement is that a Form 709 is not otherwise filed, either by requirement or voluntarily, for the year in which the Trump account contributions are made.
For example, assume in 2026 a grandparent (an individual donor) contributes $5,000 to a Trump account for each of her three grandchildren, A, B and C and that the grandparent contributes an additional $13,000 cash to C. Assume that the grandparent’s remaining unified estate and gift tax exemption and remaining GST exemption would fully shield the contributions made by the grandparent during the year from both Federal gift and GST tax, and the grandparent did not make any other taxable gifts during the year. Since the grandparent did not contribute more than the annual gift tax exclusion amount of $19,000 to any one beneficiary, when including the gifts to their Trump accounts,[4] the annual gift tax and GST tax exclusions apply to the Trump account contributions. The grandparent is not required to file a Form 709 to report the contributions.
However, if the grandparent contributes $14,500 cash to C instead of $13,000,[5] the safe harbor will not apply. The grandparent would be required to report the Trump account contributions on a Form 709 and the Trump account contributions would fail to qualify for the annual gift tax and GST tax exclusions. Additionally, even if the safe harbor requirements are otherwise satisfied, if the grandparent for any reason files a Form 709, even if not required to do so, the grandparent would be required to report the Trump account contributions on the Form 709 and the Trump account contributions would not qualify for either the annual gift tax or GST tax exclusions.
Therefore, for most taxpayers, Trump account contributions will qualify for the annual gift tax and GST exclusions. However, for those taxpayers who regularly make annual exclusion gifts to children and/or grandchildren, outside of the Trump account contributions, or who otherwise must file a gift tax return, their Trump account contributions will not qualify for the annual gift tax or GST tax exclusions and must still be reported on a gift tax return, utilizing their unified estate and gift tax exemption amount (or resulting in gift tax if they have no exemption remaining).
[1] I.R.C. § 530A.
[2] A gift is generally considered a present interest if the donee has an immediate right to use, possess, or enjoy the property or income from the property.
[3] Note, the Revenue Procedure primarily offers reporting requirement relief. Although the Revenue Procedure frames the safe harbor as allowing contributions to Trump accounts meeting the safe harbor requirements to be considered gifts of a present interest that qualify for both the annual gift tax and GST tax exclusions, for this treatment to apply, the safe harbor requires that a Form 709 is not otherwise filed, either by requirement or voluntarily. Thus, there is no way to claim the annual gift tax and GST tax exclusion for contributions made to Trump accounts on a filed Form 709. If a Form 709 is filed for a given year, any Trump account contributions made during the year will not be considered present interest gifts to which the annual gift and GST tax exclusions apply.
[4] Since the grandparent contributes an aggregate of $18,000 to C (when including both the cash contribution and Trump account contribution), less than the annual exclusion amount, all the Trump account contributions to A, B, and C and the $13,000 cash contribution to C fully qualify for the annual gift tax exclusion, as long as the safe harbor is otherwise met.
[5] Now, since the grandparent contributes an aggregate of $19,500 to C (when including both the cash contribution and Trump account contribution), in excess of the annual exclusion amount, none of the Trump account contributions qualify for the annual gift or GST tax exclusion, and the Trump account contributions to A, B, and C must all be reported as gifts of future interests. Note that the cash contribution of $14,500 to C would still qualify for the annual exclusion because it is less than $19,000.