Elon Musk’s gift from SpaceX: How do Trump account rules apply?

Elon Musk on Monday told every child in America: space x next year.

He appeared to suggest that Musk’s donations could end up in Trump’s account, thanking the program’s architect Brad Gerstner for “helping make this possible” in a comment to X. Posts from the White House and Treasury Secretary Scott Bessent also note that Musk’s donations benefited Trump’s account.

However, if the shares are distributed through a new investment account for the child, the gift may come with significant strings attached.

Musk’s announcement comes weeks after the U.S. Treasury Department released guidelines for stock donations to Trump accounts, also known as 530A accounts. These also include restrictions on the sale of donated shares. Even if the company goes into financial trouble, the donated children usually cannot sell it for five years.

The Treasury Department’s interim regulations, which may be revised after public comment, are intended to encourage stock gifts. But lawyers and philanthropy experts who spoke to CNBC say these programs give donors extraordinary power over children’s investments.

In the broader world of charitable giving, donors can typically express their wishes about how their gifts are managed, but ultimate authority remains with the receiving organization or trustee, said attorney Carolyn Shenk, a former state fraud attorney for the IRS.

But under the Trump account’s new rules, “donors decide the terms of their contributions,” she said.

Representatives for Mr. Musk, Mr. Gerstner, and the Treasury Department did not respond to CNBC’s requests for comment on the proposed gift.

According to the Treasury Department, about 70 million Trump accounts have been created, including more than 60 million from recent auto-registration efforts. Trump Accounts are available to all U.S. citizenship children under the age of 18 with a valid Social Security number.

Musk becomes the second philanthropist to publicly announce a stock donation to the Trump account. SpaceX President Gwynne Shotwell pledged earlier this summer to give away about 2 million shares through the Trump Account program. The gift has not yet been distributed.

Beneficiaries of Trump accounts do not have the freedom to sell under circumstances that other investors would otherwise have.

Under the new rules, family members cannot reject stock gifted to a Trump account and generally cannot sell it until the earliest of five years or the end of the calendar year in which the beneficiary turns 17. Earlier sales would only be allowed in limited circumstances, such as during a particular company’s transition or when shares are formally delisted from a national stock exchange, but not if financial or legal problems arise that might prompt investors to sell.

“Giving families more choice and the ability to hold the assets that they think is best for their future and their children’s future… would be a good thing,” said Adam Michel, director of tax research at the Cato Institute, a libertarian think tank. “However, this is not really the case, because the assets deposited in the child’s account have no choice and no ability to sell them during the five-year holding period.”

The interim regulations also require that if gifted shares are sold early, the trustee must purchase the same number and type of shares “as soon as practicable.”

If the stock price rises before the trustee buys back the shares, the risk of loss for the beneficiaries increases, Schenck said. Ultimately, the beneficiaries will bear the cost.

“When a fiduciary makes an investment mistake, the focus is usually on restoring value to the beneficiary, but here the focus seems to be on restoring certain security itself,” said Schenck, who left the IRS in 2025 to join the law firm Caplin & Drysdale.

CNBC found that while the buyback clause is intended to quickly correct trading mistakes, the regulations do not specify that purpose or limit the requirement to incidental sales.

The interim regulations refer to the interests of donors. According to the text, “Donors are attracted by the expectation that a gift of stock with a five-year holding period will make recipients and their families feel involved in the company’s destiny.”

Jane Ditelberg, chief tax strategist at Northern Trust, said limiting sales essentially eliminates the risk to donors and their companies that recipients of Trump accounts will sell their gifted shares en masse and liquidate positions large enough to drive down stock prices.

“Certainly for people whose wealth is concentrated in corporations and sitting in their personal pockets, this makes giving much easier,” she says.

Donors generally receive greater tax benefits by gifting appreciated stock to charity than by donating cash, as they can claim a charitable deduction and avoid capital gains taxes on the gain.

Treasury officials told CNBC that the rules are aimed at building long-term wealth and encouraging giving, especially for children in low-income families. “The major donors we engaged with are motivated by a desire to help children build generational wealth and get a head start on their financial futures,” officials said in a written statement.

The Treasury Department said it was in discussions with donors ranging from “small to large” to the Trump account, but did not specify any additional equity pledges since Shotwell’s July announcement.

CNBC identified fewer than 10 philanthropist pledges, but about 40 large employers have pledged to provide funds to the children of their employees.

In a document explaining the interim rules, the Treasury Department noted Michael and Susan Dell’s $6.25 billion cash pledge and unspecified “similar contributions,” but acknowledged uncertainty about whether that level of contributions would continue. “It is unclear whether this level of donations can be sustained over the long term or whether it will become more concentrated as Mr. Trump’s account ramps up,” the text said.

Funds in Trump Accounts can generally only be invested in low-cost index funds and exchange-traded funds. Treasury said in interim regulations that direct contribution stocks are different because they do not use account funds for purchase.

But Ditelberg said a court could conclude that requiring an account to hold individual stocks is still an investment decision. This argument could become more important after the Supreme Court overturns Chevron’s deference. The 2024 ruling no longer requires courts to defer to federal agencies’ interpretations of statutes when the text is unclear.

“These accounts must continue to be invested in these stocks, but the question is whether that directly contradicts the provisions of the statute,” she said. “I don’t know what the court will decide, but I can say there is room for objection here.”

Ditelberg added that state law recognizes the right to disclaim assets. He said it was unclear how the donation process to the Trump account would accommodate that right.

Schenck noted that the Treasury Department has broad authority to set the terms of the Trump account and that it is the Treasury Department, not the original stock provider, that is formally requesting ownership of the stock.

This arrangement also differs from traditional charitable giving. For example, a donor who donates stock to a donor-recommended fund can recommend how the assets are managed, but ultimate control, including the ability to sell the stock, remains with the sponsoring charity. This is necessary to meet the IRS’ legal standards for tax deductions for charitable contributions.

“The key principle is that for a gift to qualify as a completed charitable gift, the charity must have true control, including the ability to decide when to sell the donated assets,” said Gil Nussbaum, chief administrative and legal officer at the National Philanthropic Trust.

Experts say the broader question is whether the Treasury Department’s approach is consistent with the law Congress has enacted.

“Mr. Musk’s gift will be incredibly generous, but the fact remains that Congress intended these accounts to be diversified,” Michel said. “It’s not a bad innovation for Congress to allow tax-free gifts of valuable assets, but changes to the law should be made by Congress, not by administrative statute.”