Trump Accounts for Americans in Israel: What to Know

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December 10, 2025

Yaacov Jacob

Last Updated 6 months ago

If you needed another reason to get your new child a U.S. citizenship and a Social Security number ASAP, the government just gave you one. And honestly, the timing couldn’t be more fascinating. We’re watching an entire generation grow up without any real sense of long-term financial planning.

Most kids in the U.S. don’t have a pension. Many young adults assume Social Security won’t be there for them. Retirement feels like a distant fantasy rather than something they should be preparing for.

So imagine giving a child a retirement account before they even know how to walk. Before they start school. Before they understand what money is. That’s precisely what Trump Accounts* were designed to do. A financial seed planted at birth or early childhood that has the potential to grow quietly in the background for decades.

And if you’re raising your kids in Israel, this may sound familiar to some Israeli programs from recent years.

Key Points

- Any child under 18 with a Social Security number can have a Trump Account.

- Children born between 2025 and 2028 receive an extra $1,000 from the government.

- Parents, grandparents, and others can contribute up to $5,000 per year, and that amount will be adjusted for inflation.

- Israel will likely treat it like other IRA accounts, but there is more to think about here.

- Contributions can create long-term compounding that may be life-changing for your child’s financial future.

How Trump Accounts Work

Trump Accounts are available for any child under 18 as long as they have a Social Security number, and this one detail alone opens the door for thousands of American children living abroad.

The program was intentionally built so that eligibility does not depend on U.S. residency. If your child is a U.S. citizen under 18 and has an SSN issued before the election is made, they qualify. That means American families in Israel can participate.

But there is an additional layer of generosity. Children born between 2025 and 2028 receive an extra benefit through the government’s pilot program. For these children, the Treasury will deposit a one-time $1,000 into their Trump Account once an election is made. This money arrives directly from the U.S. government. No matching requirements. No income thresholds. No phaseouts. And no need for the child or parent to contribute anything first. Just a clean $1,000 dropped into an account specifically designed to grow for decades.

Behind the scenes, the IRS creates the initial Trump Account after an election is filed, and the parent or guardian becomes the responsible party who can manage the account.

During the growth period (the years before the child turns 18), the rules differ significantly from those of a traditional IRA. The account can hold only eligible investments, which means ultra-low-fee index funds tracking broad U.S. market indexes like the S&P 500. No leveraged funds. No thematic funds. No active management. This creates a simple and disciplined foundation for long-term compounding.

Another unique detail from the notice is that during this growth period, Trump Accounts have their own contribution limit structure. Contributions from parents, grandparents, or anyone else fall under a separate $5K annual cap that does not interact with traditional IRA limits and does not require the child to have earned income. Pilot program contributions, state contributions, and rollover contributions do not count toward that limit.

And significantly, the growth inside the account is tax-deferred for U.S. tax purposes. The IRS built the account to function like a traditional IRA once the child turns 18, but with stricter rules and restricted investments during childhood. That means the $1K grant and any voluntary contributions could sit for decades, untouched and compounding, long before the child makes their first adult financial decision.

Everyone wins.

Parents can move money into kids’ retirement accounts. Kids have money for their retirement. In the interim, the U.S. economy has invested in low-rate index funds focused on helping the U.S. grow.

Who Can Contribute and Why It Matters

Parents, grandparents, and really anyone can each contribute up to $5,000 per year. But here’s the nuance that most people miss. The $5,000 is a collective annual limit per child, not a per-person allowance. That means all non-exempt contributions into that child’s Trump Account must fit inside the same $5,000 bucket each year.

If a parent contributes $3,000 and a grandparent contributes $2,000, the child has reached the full limit for that year. Contributions from anyone else, siblings, extended family, or friends must wait until the following year unless they qualify as exempt contributions, such as the $1,000 pilot contribution, qualified general contributions, employer contributions under Section 128, or rollovers from an existing Trump Account.

This contribution cap is significant because it will not remain fixed. The $5K annual limit is slated to grow with inflation starting after 2027, making the long-term potential increasingly attractive to families who want to build a disciplined financial strategy over many years. As inflation adjustments accumulate, what begins as $5K today could grow into substantially larger annual allowances by the time a child reaches the end of their growth period.

Another layer of opportunity appears when you consider the gift tax implications. Early guidance suggests that voluntary contributions to a Trump Account are unlikely to count toward your annual gift tax exclusion. If this interpretation holds in the final regulations, it creates an entirely separate gifting channel that sits outside the traditional $ 19,000-per-donee annual limit (2026 amount). This means a parent or grandparent could deposit $5,000 into a child’s Trump Account without touching their ordinary gifting allowance or reducing their lifetime estate and gift tax exemption.

For grandparents, this is especially powerful. They can begin shifting wealth out of their estates in small annual increments that quietly accumulate over decades. Instead of giving cash that a child might spend immediately or routing gifts through accounts that become accessible at 18, Trump Accounts tie the money to the child’s long-term retirement, ensuring it cannot be misused or prematurely depleted. Given that the account invests only in ultra-low-fee U.S. index funds, grandparents don’t need to worry about poor investment decisions or high-cost products eroding long-term performance.

When you combine inflation-adjusted contribution limits, potential gift-tax efficiency, the collective structure of the $5,000 cap, and the multi-decade compounding runway, Trump Accounts become one of the most compelling long-term planning tools available to American families, especially those navigating cross-border tax systems in Israel. For many families, this may become the quietest but most meaningful legacy they ever build.

The Power of Long-Term Compounding

To show the power of long-term compounding, let’s look backward. Imagine placing just $5,000 into the most popular S&P 500 index fund 50 years ago. Very roughly, that $5K would be worth about $1.7M today! That’s the result of pure market participation and the simple discipline of not touching the money. And this calculation doesn’t require a high income, a financial advisor, or sophisticated planning. It only requires time, which is something every child has more of than any adult.

That is the magic of compounding. It grows slowly at first, often so slowly that it feels invisible. But over long periods, the growth accelerates at an unbelievable pace, stacking year upon year of reinvested gains. The early dollars do very little. The latter dollars do almost everything. When you give a child 50 to 60 years of uninterrupted growth, the outcome can be extraordinary by the time they reach retirement age.

Even small contributions can transform into something meaningful over time. A single $5K deposit today, left untouched, could become the financial cushion that helps your child retire with dignity, absorb life’s uncertainties, or even support the next generation. And unlike a typical savings account or short-term investment, a Trump Account is built structurally to stay invested for the long haul. That enforced discipline is often what makes the difference between a modest sum and a life-changing one.

The Israel Angle – Why Can’t Dual Citizens Have Nice Things?

Israel already offers the Chisachon L’Kol Yeled**, a savings program that deposits money into a savings account for every child. It’s a wonderful social benefit. But if you select the investment track, it almost always becomes a PFIC with negative U.S. tax ramifications. Being a U.S. citizen living abroad isn’t easy, and most benefits available to Israelis come with U.S. tax complications.

In case you thought it works better in the other direction, it doesn’t. Trump Accounts avoid all the negative U.S. tax issues, but face their own set of Israeli tax headaches. They invest exclusively in U.S. index funds. No PFICs. No foreign fund issues. No Form 8621 nightmares. And because these accounts convert into IRAs at age 18, Israeli tax law likely won’t tax the annual growth.

That doesn’t mean Israel won’t take its cut of taxes, though. Israel generally taxes IRAs only when the funds are withdrawn. While we still need official Israeli guidance to confirm the exact treatment, the tax will likely be at higher rates once that baby grows older and eventually withdraws those funds.

Comparing Families in the U.S. vs. Israel

For families living in the U.S., a Trump Account might be the only long-term savings vehicle a child ever has access to. For many American parents, this is the first time they’ve encountered a structured, government-backed way to create a pension-like foundation for their children. At least one that doesn’t include “hiring” your kids as employees. In Israel, the picture looks a little different.

Families in Israel already have access to multiple savings frameworks. Chisachon deposits money for every child. Pension savings are built into the culture, with every employee automatically putting money away, far more than in America. The average Israeli grows up with far more exposure to savings than their American peers of a similar age.

But that doesn’t make the Trump Account any less meaningful. It gives you an entirely separate, long-term bucket that exists outside the Israeli system, one that grows under U.S. rules and yields a different set of tax outcomes. It’s another way to diversify your child’s financial future by adding a slow-building, compounding tool that matures over decades. And for families thinking about legacy planning, cross-border opportunities, or simply giving their children more options later in life, this account becomes another way to provide them with a running start and a sense of security that lasts long after childhood ends.

So Should You Open One?

It may be a good idea, especially if your child qualifies for the free $1K. That benefit alone is hard to ignore. And once you add in the possibility of estate-friendly contributions and inflation-adjusted limits, this new vehicle becomes even more compelling. For many families, it won’t be about making a massive contribution today. It will be about starting something small and letting time do what it does best.

But it’s also essential to approach this with a thoughtful, measured strategy. We’re still waiting on clarifications on Israeli taxes, which will take time. Questions remain about how Israel will formally classify tax withdrawals, how cross-border reporting will work once the child becomes an adult, and whether the mechanics of gifting will be clarified in final regulations. None of these uncertainties is a deal-breaker, but they do shape how aggressively a family may want to contribute during the early years.

The encouraging part is that the foundational rules are already favorable.

The account is simple.

The investment menu is disciplined.

The tax structure is familiar.

And the long runway until the child reaches retirement age means small decisions now can create outsized benefits later. Trump Accounts are not about chasing performance or timing markets. They are about giving your child a slow-building financial anchor that compounds quietly for decades.

We will continue publishing more guidance and analysis as the IRS and Israeli authorities clarify the details and finalize their positions. As more information becomes available, you’ll have everything you need to make informed, strategic decisions for your family.

Stay tuned and reach out with any questions. You can also see our podcast episode covering more aspects of the Trump Accounts.