Donated stocks locked for five years with no opt-out for children
The Treasury Department in late September enacted two changes that converted Trump Accounts from a voluntary child investment program into a near-universal vehicle in which millions of children now hold donated individual stocks they cannot refuse and generally cannot sell for five years.
The first change flipped the program to auto-enrollment. Before last week, the Trump Accounts program had accumulated about 7.2 million sign-ups since its launch, with $1,000 government seeds for newborns, employer contributions, and cash gifts from philanthropists such as Michael and Susan Dell. Sign-ups had been increasing only modestly, and some Trump opponents resisted signing their children up for something with the president’s name. After the Treasury switch, more than 60 million new accounts were created in a single week, and every child now has an account.
“All their efforts around opt-in, Super Bowl ads, outreach, commercials, everything, they only got to 7.2 million accounts,” said Ray Boshara, a senior policy adviser at the Aspen Institute and Washington University in St. Louis. “Flipping the switch is really a game-changer.”
The second change opened a new channel for individual-stock donations. Under rules that took effect, charities controlled by wealthy donors — with Treasury Department approval — can place individual stocks in the accounts of thousands or millions of children, targeting groups of at least 5,000 sorted by age, geography, or both. Other contributions — from parents, employers, and the federal government — must be cash invested in low-cost index funds. Stock donations, however, generally cannot be sold for five years under the rules, and neither children nor parents have the power to refuse a stock gift, though the administration is fielding comments on whether opt-outs should be allowed.
Treasury officials defended the policy in the rules themselves. The department contended that the policy would encourage many more donations, outweighing the additional risk and volatility, and said explicitly that strengthening ties between kids and particular corporations was part of the appeal to prospective donors. “Donors are attracted by the hope that a stock contribution with a five-year holding period may lead recipients and their families to feel that they have a stake in the fate of the corporation to a greater extent than if the child’s holdings of the corporation were only through an index fund,” the rules said. A Treasury official said the program’s goal is to build long-term wealth, particularly among low-income families, and that donors are motivated by a desire to help children get a head start on their financial future.
Critics argued the rule violated congressional intent. Congress created Trump Accounts in last year’s tax-and-spending law, which says the accounts can invest only in low-cost index funds. Treasury officials argue the prohibition does not apply to stock donations because the account’s own funds are not used to purchase the stock.
Adam Michel, director of tax policy at the libertarian Cato Institute, said allowing stock donations is contrary to congressional intent. “It’s pretty clear Congress intended it to be cash donations going in,” he said.
Mark Iwry, a former senior Treasury official who led national retirement policy in the Clinton and Obama administrations, praised the auto-enrollment expansion but flagged the stock-donation track. “I applaud this administration,” Iwry said, “provided these measures are implemented responsibly, in good faith, and free of conflicts of interest, corruption, and ulterior motives.”
Lily Roberts, vice president of policy and programs at the Washington Center for Equitable Growth, a progressive group, said the program needs stronger guardrails. “Treasury needs to really have some strong guardrails here,” Roberts said. She said she worried that executives could offload stock if they expected the value to drop.
The first major stock donor to announce a gift is Gwynne Shotwell, president of SpaceX, who in July pledged more than two million shares to children between ages 11 and 17 who live in lower-income areas. Officials have signaled that several donors are poised to make multibillion-dollar gifts of stock under the new rules, though the administration has not yet detailed the “objective criteria” the Treasury secretary will use to approve or reject donor requests, such as cost, feasibility, and conflicts with other federal laws.
Cash contributions remain substantial. The Dells’ foundation had given $250 each to 1.2 million children and pledged enough for 25 million children born between 2016 and 2024 in zip codes with median family income below $150,000. Parents can donate up to $5,000 a year. The government is putting in $1,000 for each baby born from 2025 through 2028, though that payment will not reach auto-enrolled accounts until parents or guardians claim them. Trump Accounts convert to individual retirement accounts when children turn 18. Employers can donate and let workers fund accounts with payroll deductions. Donors do not receive tax breaks when their foundations give money to Trump Accounts, though they can claim income-tax deductions when they donate stock to their foundations.