Last Updated 6 months ago

Parents are about to get a brand-new way to turbocharge their kids’ future. The sweeping U.S. bill (OBBB) signed on July 4, 2025, launched the Trump Children Savings Account that mirrors an IRA built only for minors. Meanwhile, Israeli families have become familiar with a similar Saving for Every Child program since 2017 through Bituach Leumi deposits into a bank or provident fund. Both programs promise free money and compound growth, yet the tax angles could make a gift a headache. Here is how both plans work and how to squeeze every dollar and shekel from them.

Key Takeaways:

• The new Trump Children’s Savings Account provides up to $7,500/year in contributions and government seed money for U.S. minors.
• Israel’s Bituach Leumi child savings plan offers smaller monthly deposits but can build up to ₪37,000 by age 18.
• Dual citizens face complex tax issues, including PFIC rules for Israeli funds and Israeli taxes on U.S. accounts.
• Coordinating both plans can help families save over $100,000 by the time a child turns 18.

The Trump Children’s Savings Account

Congress stitched every rule of a classic IRA into a child-focused wrapper, then sweetened it with Treasury cash.

Any child with a Social Security number under 18 can receive a single account, and the Treasury will even open it automatically if a parent does not. The election is one time, so plan carefully.

Contribution clarifications still need to be issued, so you cannot contribute for at least 12 months after the enactment. However, here is the preliminary information from the passed bill. Babies born from 2025 through 2028 get a $1,000 seed that the government treats as if the child paid tax. Treasury can drop the cash straight into the account, and the refund is protected from offset for back taxes or student debt. Alternatively, it may be a refund on the parent’s tax return who opened it up and funded the account themselves.

Eventually, once clarified, parents may drop up to $5,000 into the account each calendar year. That ceiling begins to track inflation in 2028. These parent deposits do not qualify for the usual IRA deduction while the child is under 18, so there is no carryover math.

Employers can add another $2,500 a year per employee, and those deposits are excluded from the employee’s and the child’s gross income under the new Section 139J. 

Until the calendar year the child turns 18, every dollar must sit in an eligible investment. That means a passive index mutual fund or ETF that mirrors the SP 500 or a similar broad U.S. benchmark charges no more than 0.10 % in annual fees and uses no leverage. Treasury will contract with trustees who meet stringent service and cost standards.

Money is locked until 18 except for a tax-free rollover to another Trump account or a once only transfer at 17 into an ABLE plan for a disabled beneficiary. An early withdrawal triggers ordinary income tax plus a painful 100% penalty on the earnings. 

After 18 years, the wrapper disappears, and the pot converts to a vanilla IRA. Contributions made before 18 never chew up the child’s or parent’s regular IRA limit.

Run the math at a steady 7% return. A household that makes the maximum family deposit and enjoys the full employer match could end up with well over a six-figure account by the 18th birthday.  The result is an invaluable springboard that can keep compounding for decades or pay for tuition or the kid’s new YouTube channel business account. Isn’t that what you want your kids to do with these savings? 

Israel Had it First! Saving for Every Child

Bituach Leumi began depositing 50 NIS/month for every eligible child in 2017. The state share is now 57 NIS because deposits track the consumer price index, and parents can still double that figure by allocating the same amount from their child allowance. 

Families choose a plain bank track with a fixed rate or one of several provident fund tracks that range from bonds to equity. The account adds a 500 NIS birthday bonus at 18 and another 500 NIS if funds stay in place until 21. Withdrawals before 18 are blocked except for hardship. Assuming parents doubled the deposit and earned a 4% annual return, the balance can reach about 37,000 NIS at 18, which converts to roughly $10,000 if the exchange rate holds near 3.7.

The Complications of Dual Citizenship

While having two countries helping save money for your kids is wonderful, there’s got to be a catch, right? The two tax systems don’t always see eye to eye, but the challenges may be less than expected.

U.S. Problems with the Israeli Savings Plans

Every Israeli provident fund is likely considered a Passive Foreign Investment Company or PFIC for U.S. tax purposes.  This means that if these accounts become something substantial, the taxation of the gains will be harsh for that 18-year-old U.S. citizen.  However, the issue for these specific accounts can be blown out of proportion and made into something bigger than it is. It is good to be aware of the issue.

 If you are investing in other kupot gemel for your child, you should contact our office and likely stop investing. I wouldn’t be too concerned if it is just this mandatory Saving Every Child account.

Israeli Tax on the U.S. Trump Account

On the other side of the ocean, we need to be careful how Israel treats these new Trump accounts. Israel treats most foreign retirement accounts as taxable upon payout. A Trump Children Savings Account will likely be viewed as a pension distribution and attract the usual Israeli taxes when the child begins taking money. This can get confusing with kids who came on Aliyah, and Israel doesn’t always treat IRAs the same as the US. If you are taking all the benefits provided and allocating large amounts into these Trump accounts, it is suggested to consult with an Israeli accountant to make sure everything is buttoned up.

How the Numbers Stack Up by 18

Pretend an American Israeli household uses both programs at full throttle. They feed $5,000 a year into the Trump account, and double their Israeli deposit to 114 NIS a month. Under a 7% return for US equities and a 4% return in shekels, the child could reach a combined war chest of potentially over $100,000 before any taxes. That can fund a dream university plan or seed a first home deposit.

Keep Watch!

Two governments now give your kids real money to grow. While needing some clarity, the Trump account offers larger upside inside the U.S. tax net while the Israeli account gifts steady shekels but hides a PFIC snare for U.S. citizens. This is one area we will be watching closely, and you should too!  If you follow us and subscribe to our newsletter, we will make sure to keep you updated!

For more on Child Tax Credits and the Trump Account, tune into our podcast episode!