President Trump’s foster child account: What you need to know

Advocates say the Trump account could provide children in foster care with a more secure financial footing as adults, but there are still some important details to iron out.

Under an initiative announced in early June by first lady Melania Trump in conjunction with the Treasury Department, states will be able to open Trump accounts on behalf of eligible foster children. So far, 25 governors have pledged to do so, according to a new tally provided by the Department of Health and Human Services.

The goal is to help this vulnerable population reach adulthood with a financial safety net. Experts say that’s what many children lack when they age out of foster care. However, there are several issues, including limited access to funds held in the Trump account if needed and whether those assets could affect eligibility for services available as an adult.

“Overall, I think there is merit to (these) accounts, but we also need more flexibility to ensure that foster care children have access to funds at a critical time in their transition from care,” said Daniel Hatcher, a law professor and child welfare finance expert at the University of Baltimore School of Law.

The Trump Account, which opened on July 4, is a tax-advantaged investment account for children that allows parents, guardians, grandparents and others to contribute up to $5,000 a year after taxes until the year before the beneficiary turns 18. Babies born between 2025 and 2028 who have an account will receive an initial deposit of $1,000 from the Treasury Department.

Employers are also allowed to contribute up to $2,500 per worker each year, which is part of the $5,000 contribution limit. Additionally, qualifying charities and state and local governments can make donations that don’t count toward the annual limit.

For foster children, the state will open an account as their legal guardian. Experts say these children are likely to benefit from outside donations and grants, and their accounts may also be repositories for certain federal benefits that a small percentage of them receive.

HHS data estimates that by 2025, there will be 331,747 children in foster care.

Roughly 15,000 seniors will be removed from foster care by 2025, according to HHS data. In most states, a child becomes a legal adult at age 18. For foster children, each state typically provides some form of long-term foster care for eligible young adults who choose to remain in the program, usually until age 21.

While there are services to help former foster children transition into adulthood, such as rental assistance and workforce training vouchers, advocates say the Trump account could become another support tool. But whether they ultimately deliver the benefits envisioned remains an open question, proponents say.

“We are thrilled that this focus on foster children will draw attention to the long-term needs of children and youth in foster care,” said Ernie Eby, executive director of the National Foster Parents Association.

But Eby said, “I’m not 100% sure that the benefits[of the Trump account]will work out as intended or expected.”

Assets in Trump accounts generally cannot be accessed until the person turns 18. One problem for foster children is that at that age, the account becomes their property, but they may not have free and easy access to the money.

This is because the rules that govern traditional individual retirement accounts apply. Withdrawals are subject to ordinary income tax rates, but unless the funds are already taxed at the time of contribution, funds withdrawn before age 59 1/2 may be subject to a 10% early withdrawal penalty unless an exception is met.

These exceptions include higher education expenses, up to $10,000 for the purchase of a first home, up to $5,000 for the birth or adoption of a child, $1,000 annually for personal emergencies, tax-deductible medical expenses, and health insurance premiums during unemployment.

But experts say if their needs fall outside of these exceptions, having to pay a fine could be problematic because it would further devalue what could be one of the few assets they have.

“Long term, I think flexibility is something that needs to be addressed,” Eby said. “You don’t want your money to increase because it’s not being used for permissible reasons, and then suddenly decrease.”

At the same time, the Trump account could give foster children access to money they wouldn’t otherwise have.

Already, charitable pledges have been made to the Trump account, including $6.25 billion from Michael Dell, founder of. Dell Technologiesand his wife Susan. In that case, children born between 2016 and 2024 would each receive $250 if they live in a ZIP code with a median income of $150,000 or less.

Other commitments are also being made at the state and local level.

Ray Dalio, founder of the investment firm Bridgewater Associates, and his wife, Barbara, have pledged to donate $250 to each qualifying child in Connecticut. Like the Dells, their endowment will target children living in ZIP codes with median incomes of $150,000 or less.

Altimeter Capital CEO Brad Gerstner, who spearheaded the Trump account, pledged to donate $250 to qualifying children under age 5 in Indiana. micron technology The memory chip maker also pledged $250 per account to children in the communities where it operates.

There are also approximately 27,000 foster children receiving Social Security and/or Supplemental Security Income benefits, according to the Social Security Administration. For example, the death of a parent may result in Social Security survivor benefits, but SSI may apply if the disabled individual meets the income requirements for eligibility.

When the foster care initiative was announced on June 11, Treasury Secretary Scott Bessent said states could direct survivor benefits and SSI to Trump’s account.

But experts say many state child welfare agencies are now stealing these federal benefits to cover their own costs. As of last year, only 11 states had policies in place to maintain survivor benefits for foster children. In mid-December, the Office of Children and Families, an agency within HHS, announced it had notified the remaining 39 state governors to stop diverting these benefits.

Since then, the number of states that have agreed not to preempt survivor benefits has increased to 28, and only a few states do not receive SSI, according to information provided by HHS. However, it is unclear whether more states will change their practices or use Trump accounts as a place to store their assets.

States are already allowed to save benefits on behalf of foster children through checking and savings accounts. If offered, you can also open an Achieving a Better Life Experience (ABLE) account specifically for individuals with disabilities for foster children receiving SSI due to a disability. You can deposit up to $100,000 into your account without affecting your SSI eligibility.

If states direct children’s federal benefits to Trump accounts, they may not receive the full amount.

The average monthly survivor benefit for someone under 18 is about $1,181, according to the Social Security Administration. For SSI, the average benefit for children under 18 is approximately $874 per month.

According to the Treasury Department, if survivor benefits are deposited into Trump’s account, they will count toward the $5,000 limit. This means that excess survivor benefits must be kept in a separate account for the child. Guidance regarding SSI and how it will be handled on Trump accounts has not yet been released.

Additionally, Trump accounts are not considered in determining SSI eligibility before a child reaches age 18, according to the Social Security Administration, but it is unclear how those assets will be counted for means-based services after the child reaches adulthood.

“If Trump’s account prevents them from continuing to receive resources when they turn 18 or 21, whatever their state’s standards are, that’s an unintended consequence that makes their situation worse,” Eby said.

But advocates generally welcome the focus on improving long-term outcomes for children in foster care, he said.

“We just want to make sure that these funds change the trajectory of people who have been through the child welfare system,” Eby said.