The first day anyone could put money into a Trump account was July 4, 2026, and grandparents across the Inland Empire are asking the same two questions: should we put money in, and what does California think of it? Until this summer, the second answer was unfriendly. The Franchise Tax Board’s conformity table, last updated in April, said California didn’t follow the federal Trump account rules at all. Then the Legislature passed SB 180, a tax budget trailer bill chaptered on July 13, 2026 as Chapter 85 of the Statutes of 2026, which generally conforms state law to the federal treatment of these accounts for tax years beginning on or after January 1, 2026. That changes the planning math for California families, and it makes the gift tax details and the control-at-18 question more important than the state tax question.
What is a Trump account?
Internal Revenue Code § 530A, added by the 2025 federal tax law, creates a special individual retirement account for a child under 18 who has a Social Security number. Until January 1 of the year the child turns 18, the account can hold only low-cost funds tracking a U.S. equity index, and no distributions are allowed. Regular contributions, from parents, grandparents, friends, and employers combined, are capped at $5,000 per year, a figure indexed for inflation after 2027. Some contributions don’t count against that limit, including the one-time $1,000 federal pilot deposit under § 6434 for U.S. citizen children born from 2025 through 2028, and certain general contributions from governments and charities. Parents claim the pilot deposit by election on IRS Form 4547 or through trumpaccounts.gov.
Contributions aren’t deductible. After-tax contributions from family members create basis, so they come back tax-free, while the pilot deposit, employer contributions, and all of the growth are taxed when withdrawn. Once the growth period ends, the account generally works like a traditional IRA in the child’s name. Employers can contribute up to $2,500 per employee under § 128, and Treasury published proposed rules for those employer programs on August 11, 2026, with comments due September 25.
How does California tax Trump accounts after SB 180?
California doesn’t adopt federal tax changes automatically. Its conformity date under Revenue and Taxation Code § 17024.5 was January 1, 2025, which is why the FTB’s summary of federal changes originally said the state didn’t conform. Without conformity, earnings inside the account could have been taxable to the family every year, the way California still treats health savings accounts. The Assembly Budget Committee’s June 27, 2026 floor report described SB 180 as conforming state law to the favorable federal treatment of these children’s accounts “for ease of taxpayer compliance,” and the enacted bill applies beginning with the 2026 tax year.
For most families, that means the account grows without annual California tax and is taxed on withdrawal, as it is federally. California’s usual additional tax on early retirement account withdrawals is 2.5% under § 17085(c), rather than the federal 10%. Two cautions apply. The FTB hasn’t yet updated its published guidance, and the Employment Development Department hasn’t said how employer contributions should be treated for state wage reporting. Employers setting up contribution programs should confirm their payroll provider’s California treatment before the first deposit.
Do grandparents need to file a gift tax return?
Usually not, if they stay inside the safe harbor in Revenue Procedure 2026-25. A gift to a minor’s account that can’t be touched until 18 would normally be a gift of a future interest, which doesn’t qualify for the annual exclusion. The revenue procedure lets individuals treat cash Trump account contributions as present-interest gifts eligible for the $19,000 annual exclusion for 2026, with no Form 709, but only if several conditions hold. The donor must be an individual, the only taxable gifts must be cash Trump account contributions, the donor’s total gifts to that beneficiary for the year can’t exceed $19,000, no gift or generation-skipping transfer tax can result, and no gift tax return can be required or filed for any other purpose. If the donor goes over the limit or files a 709 anyway, the contributions have to be reported as future-interest gifts.
That last condition creates a trap for families who also fund college savings. A grandparent who “superfunds” a ScholarShare 529 plan by electing to spread a large gift over five years must file a Form 709 in the first year, and when the ratable amount in each later year uses the full $19,000 exclusion, that grandparent’s Trump account contributions fall outside the safe harbor for the rest of the five-year window too. Nothing may be owed, given the $15 million federal exemption, but the reporting obligation returns every year.
California’s community property rules help married grandparents. The Form 709 instructions treat a gift of community property as made half by each spouse, so a Riverside couple can give $38,000 of community funds to one grandchild without the gift-splitting election that would itself require a return.
Who controls the money when the child turns 18?
The child does, and that’s the question families should spend the most time on. Under the proposed regulations Treasury issued in March 2026, the child owns the account, and a “responsible party,” chosen in priority order starting with a legal guardian and then a parent, manages it until the growth period ends. After that, the young adult can withdraw funds, subject to income tax on the taxable portion and federal and California early-withdrawal additional taxes unless an IRA exception like higher education expenses applies. There’s no way to name a trustee to hold the money until age 25 or 30.
California’s Uniform Transfers to Minors Act offers slightly more control, but less than many people assume. A custodian normally transfers the property at 18, and Probate Code § 3920.5 allows a later date. A lifetime gift can be held only until 21, while a transfer under a will or trust can be held until 25. A trust is still the only tool that lets a family decide how long money stays protected, what it can be used for, and who steps in if something goes wrong.
| Feature | Trump account | ScholarShare 529 | California UTMA account | Irrevocable trust |
|---|---|---|---|---|
| Who controls at 18 | The child | The account owner, often the parent or grandparent | The child at 18, or up to 21 or 25 depending on how funded | The trustee, on the family’s terms |
| Annual family contribution limit | $5,000 per child | No annual limit, but a maximum account balance; gift tax rules apply | None | None |
| California tax on growth | Deferred after SB 180 | Tax-free for qualified expenses | Taxed yearly, subject to kiddie tax rules | Depends on trust design |
| Gift tax safe harbor without Form 709 | Yes, Rev. Proc. 2026-25, $19,000 limit | Annual exclusion; 5-year election requires 709 | Annual exclusion | Generally needs Crummey powers or a 709 |
| Investment choices | Low-cost U.S. equity index funds only | Plan menu | Broad | Broad |
What does a sensible plan look like for a Riverside family?
Consider grandparents in Riverside with two grandchildren, one born in March 2025 and one in May 2026. The parents make the pilot elections, so each child receives the $1,000 federal deposit, and neither parent’s employer contributes. In 2026 the grandparents contribute $5,000 of community funds to each child’s Trump account, using that child’s full annual family limit, and put the remaining exclusion, $33,000 per grandchild, into ScholarShare accounts without a five-year election. That’s $76,000 of gifts with no gift tax return.
If they keep contributing $5,000 a year to the younger child’s account through 2043 and the account earns 7% a year (treating each contribution as made at the start of the year for simplicity), it would hold about $185,000 when the growth period ends, on $91,000 of total contributions. The $90,000 the grandparents put in is basis. The pilot deposit and all of the growth would be taxable when withdrawn, for both federal and California purposes. Those figures are illustrations, not projections, but they show why the question of who controls a six-figure account at 18 deserves as much thought as the tax treatment.
What about children with disabilities or families who may need public benefits?
The Social Security Administration’s program manual, at POMS SI 01120.250, says a Trump account isn’t counted as a resource for Supplemental Security Income while the child is in the growth period, but becomes countable after 18. For a child with a disability, that makes the timing of the one-time rollover to an ABLE account important; the federal statute permits a rollover in the year the child turns 17. Families in that situation should plan the account alongside a special needs trust rather than in isolation. Medi-Cal’s reinstated asset test, effective January 1, 2026, applies only to certain non-MAGI programs, and the state hasn’t issued guidance addressing Trump accounts.
One more estate planning detail: if a child dies before the growth period ends, § 530A(d)(6) treats the account’s value above basis as taxable income to the person who receives it, or to the child’s final return if the estate takes it. That’s a small risk, but it’s another reason to coordinate beneficiary designations and trust planning with these accounts.
Frequently Asked Questions
Does California tax Trump accounts?
SB 180, enacted in July 2026, generally conforms California to the federal treatment starting with the 2026 tax year, so growth isn’t taxed annually and withdrawals are taxed when made. The FTB hasn’t yet updated its published guidance.
How much can a grandparent contribute to a grandchild’s Trump account?
Total contributions from family and friends are capped at $5,000 per child per year. The $1,000 federal pilot deposit and certain government or charitable contributions don’t count against that limit.
Do I need to file a gift tax return for a Trump account contribution?
Not if you meet Revenue Procedure 2026-25: cash contributions only, total gifts to that child of $19,000 or less for 2026, and no other reason to file a Form 709 that year.
Can a trust own a Trump account or hold it until the child is older?
No. The child owns the account, and a responsible party manages it only until the growth period ends at 18. A trust funded separately is the way to control money past that age.
Does a Trump account affect SSI eligibility?
According to Social Security’s program manual, the account isn’t a countable resource for SSI during the growth period but becomes countable after the child turns 18.
Which children get the $1,000 federal deposit?
U.S. citizen children with Social Security numbers born after December 31, 2024 and before January 1, 2029, if a parent or other eligible person makes the election.
How North Star Law Firm Can Help
North Star Law Firm helps California families fit new savings tools into an estate plan, including trusts that control money after 18, gifting strategies that avoid unnecessary gift tax filings, and planning for children with disabilities. Phillip Zagotti is a California attorney and a CPA and co-author of Trusted: The Essential Guide for Trustees. Learn more about the firm’s revocable living trust work, its special needs and Medi-Cal planning, and its trust and estate tax return services, or schedule a consultation to review a grandchild gifting plan.