With ‘Trump Accounts,’ your baby could qualify for $1,000. Here’s what to know

By MORIAH BALINGIT WASHINGTON AP When the children of wealthy households leave the nest they often benefit from their parents largesse in the form of a trust fund Less affluent peers may receive nothing at all or even be expected to sponsorship their families when they become adults Related Articles US filings for jobless benefits fall to lowest since September of Jeep Wagoneer packs a comfy price tag Nvidia CEO Jensen Huang visits Republicans as debate over intensifying AI race rages New Hampshire welcomes manufacturer fleeing Massachusetts Predictable aftermath Ticker Americans gave B on GivingTuesday Big cheese recall But what if all children regardless of their family s circumstances could get a financial boost when they turn That s the idea behind Trump Accounts a lesser-known provision of President Donald Trump s tax bill The bill signed into law earlier this year gives to every newborn so long as their parents open an account That money is invested in the stock area by private firms and the child can access the funds when they turn The parents of older children can also open accounts but they won t get the bonus Backers say it s a way to bolster capitalism and help children from low-income households build wealth at a time when openly socialist candidates are growing more popular The new initiative gives the bonus only to babies born during the calendar years of the Trump administration Thanks to a historic donation released Tuesday by billionaires Michael and Susan Dell several children and under could receive in seed money if their parents open an account That money is reserved for kids who live in ZIP codes with a median family income of or less and who won t get the seed money from the Treasury Here s what you need to know about Trump Accounts and how to claim them What is a Trump Account It s new savings tool where money is invested in the stock area on behalf of a child The child can t access the money until they turn and can only use it for specific purposes such as paying tuition starting a business or making a down payment on a home After a parent opens an account the U S Treasury will contribute for newborns Private banks and brokerages will manage the money which must be invested in U S equity index funds that track the stock sector and charge the accounts no more than in annual fees Parents can contribute up to annually in pretax income much like they do for retirement accounts Parents employers relatives friends local governments and philanthropic groups can also pitch in Yearly contributions are capped at but contributions from governments and charities don t count toward that total Who gets To qualify for the seed money a baby must be a U S citizen have a Social Safeguard number and be born between Jan and Dec Any parent can open an account for a qualifying child regardless of the parent s immigration status It s crucial to note that the child won t be able to access the money until they turn except in rare circumstances so it can t help with immediate expenses And disbursements from the accounts will be subject to taxes What about older children Children born before won t qualify for the incentive but parents can still open accounts for them as long as they re under Parents can still invest up to pretax for those kids and they may benefit from the Dells donation giving to children and under in certain ZIP codes How do I open a Trump Account for my kids The accounts won t be open for contributions until July But parents of eligible kids can sign up now by filling out Form from the Internal Revenue Organization As of Tuesday afternoon that form was not yet available on the Trump Accounts website In May parents who sign up will get information about how to finish opening the accounts Beginning in July the White House says it will have a website where parents can register for the accounts What s the idea behind the accounts Backers of the accounts say they want to introduce more people to the stock field and give even children born into poverty a chance to benefit from it They believe that giving every newborn will help combat the rising popularity of socialism and offer more people the opportunity to build wealth About of U S households held stocks or bonds in according to the U S Securities and Exchange Commission though the wealthiest owned almost half the value of stocks in that same year Before Trump created the accounts California Connecticut and the District of Columbia were piloting baby bonds programs that are similar to Trump Accounts in specific methods Several other states including Maryland are weighing programs But those programs are targeted for youth growing up in poverty or foster care plus children who lost a parent to COVID- Wealthier children don t benefit They re also managed by the state not private outlay firms What do critics say Critics point out the accounts do little to help children in their early years when they re majority vulnerable and most of likely to be in poverty They also say the accounts do little to offset the cuts the Trump administration and congressional Republicans have made to other programs that benefit young people and their families including food assistance and Medicaid Republicans created the accounts in the same Trump tax bill that reduced spending for particular of those programs And even with the contribution from the authorities critics say the Trump Accounts will widen the wealth gap Affluent families that can afford to make the maximum pretax contribution to the accounts will realize the greatest benefits Poor families who can t afford to set aside money for the accounts will benefit the least Assuming a return the in seed money would grow to roughly over years The Associated Press guidance coverage receives financial backing from multiple private foundations AP is solely responsible for all content Find AP s standards for working with philanthropies a list of supporters and funded coverage areas at AP org