Trump Accounts for foster children: What to know

Trump Accounts could provide kids in the foster care system with a more secure financial footing in adulthood, advocates say — but there are still some key details to work out.

Under an initiative announced in early June by First Lady Melania Trump in conjunction with the U.S. 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 U.S. Health and Human Services Department.

The goal is to help this vulnerable population reach adulthood with a financial safety net — something experts say many kids lack when they age out of the foster care system. Yet there are some sticking points, including limits on accessing money held in a Trump Account if needed and whether those assets could affect eligibility for services that these individuals may qualify for as adults.

“Overall, I think there can be benefits to [these] accounts, but there also needs to be more flexibility so that foster youth have access to the funds at the critical time when they are transitioning out of care,” said Daniel Hatcher, a law professor at the University of Baltimore School of Law and an expert on child welfare finances.

Trump Accounts — which launched July 4 and are tax-advantaged investment accounts for kids — allow parents, guardians, grandparents and others to contribute up to $5,000 annually in after-tax dollars until the year before the beneficiary reaches age 18. Babies born between 2025 and 2028 who have an account will get a $1,000 initial deposit from the Treasury Department.

Employers also are permitted to contribute up to $2,500 per worker each year, which is part of the $5,000 contribution limit. Additionally, qualifying charitable organizations, as well as state and local governments, can make contributions that don’t count toward the annual cap.

For foster children, states would be opening their accounts as legal guardians. These kids would likely benefit from donations or grants from external sources, experts say, and their accounts may also be the repository for certain federal benefits that a small share of them receive.

There were an estimated 331,747 children in foster care in 2025, according to data from HHS.

Roughly 15,000 aged out of the foster care system in 2025, HHS data shows. In most states, all children become legal adults at age 18. For foster kids, states typically offer some form of extended foster care — usually through age 21 — for eligible young adults who choose to remain in the program.

While there are services available to assist former foster kids in the transition to adulthood — including rent help, workforce training vouchers — supporters say the Trump Accounts could be another tool to help. But whether they will ultimately deliver the benefits envisioned remains an open question, advocates say.

“We’re very pleased that the emphasis on foster kids … brings attention to the long-term needs of children and youth experiencing foster care,” said Arnie Eby, executive director of the National Foster Parent Association.

However, “we’re not 100% sure if the benefits [of Trump Accounts] will work out like they’re intended to or hoped for,” Eby said. 

This is because the rules that govern traditional individual retirement accounts will apply. Ordinary income tax rates apply to withdrawals — unless the money had already been taxed when contributed — and a 10% early withdrawal penalty could apply to money taken out before age 59½ unless an exception is met.

Those exceptions include higher education expenses, up to $10,000 to purchase a first home, $5,000 for birth or adoption of a child, $1,000 annually for personal emergencies, medical expenses that qualify for a tax deduction and health insurance premiums while unemployed.

However, if their need falls outside of those exceptions, having to pay a penalty would be problematic because it would further reduce the value of what may be one of the few assets they have, experts say.

“I think, long-term, the flexibility is going to be something that needs to be worked out,” Eby said. “We don’t want the money to grow and then suddenly it’s diminished because it’s not used for an allowable reason.”

Already, philanthropic pledges have been made to Trump Accounts, including $6.25 billion from Michael Dell, founder of Dell Technologies, and his wife, Susan. In that case, children born between 2016 and 2024 could each get $250 if they live in a ZIP code where the median income is $150,000 or less.

Other pledges are happening at the state and local levels.

Founder of investment firm Bridgewater Associates Ray Dalio and his wife, Barbara, have committed to giving $250 to each qualifying child in Connecticut. Like the Dells, their contributions are for kids who live in a ZIP code where the median income is $150,000 or less.

Altimeter Capital CEO Brad Gerstner, who helped spearhead Trump Accounts, has pledged $250 to qualifying children under age 5 in Indiana. Micron Technology also pledged $250 per account for children in communities where the memory chip maker operates.

There also are about 27,000 foster children who receive Social Security and/or Supplemental Security Income benefits, according to the Social Security Administration. Social Security survivor benefits can come into play due to the death of a parent, for example, while SSI may apply for individuals with a disability if they meet income rules for eligibility.

When the foster care initiative was announced June 11, Treasury Secretary Scott Bessent said states would be able to direct survivor benefits or SSI to Trump Accounts.

However, many state child welfare agencies currently intercept those federal benefits to reimburse their own costs, according to experts. As of last year, just 11 states had policies in place to preserve survivor benefits for foster children. In mid-December, the Administration for Children and Families, an agency within HHS, announced that it had notified the remaining 39 state governors to stop diverting those benefits.

Since then, the number of states that have agreed not to intercept survivor benefits has grown to 28, according to information provided by HHS, and only a few don’t take SSI. However, it’s unclear whether additional states will modify their practices or use Trump Accounts as a place for the assets.

Already, states are permitted to conserve benefits on behalf of a foster child through a checking or savings account. They also can open Achieving a Better Life Experience, or ABLE, accounts if offered — which are specifically for individuals with disabilities — for foster kids receiving SSI due to a disability. Up to $100,000 can be in the account without affecting eligibility for SSI.

If states do direct children’s federal benefits to Trump Accounts, they may not be able to deposit 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 among children under 18 is roughly $874 monthly.

If the survivor benefits are deposited into a Trump Account, it would count toward the $5,000 cap, according to the Treasury Department — which means any excess survivor benefits would need to be kept in a separate account for the child. No guidance has been released yet regarding SSI and how it would be treated in a Trump Account.

Additionally, while a Trump Account would not be considered when determining eligibility for SSI before the child reaches age 18, according to the Social Security Administration, it’s uncertain how those assets would be counted for any means-based services once the child reaches adulthood.

“If a Trump Account gets in the way of them continuing to receive resources at [age] 18 or 21, whatever their state’s threshold is, that’s an unintended consequence that makes their situation worse,” Eby said.

By and large, however, advocates welcome the focus on improving long-term outcomes for children in foster care, he said.

“We just want to make sure that, as intended, these funds change the trajectory of someone who experienced the child welfare system,” Eby said.