Trump Accounts Offer Foster Youth a Financial Safety Net: Key Details

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Trump Accounts could give children in the foster care system a stronger financial foundation as they transition to adulthood, advocates note, though several important details remain unresolved.

An initiative launched in early June by First Lady Melania Trump, in partnership with the Treasury Department, allows states to open Trump Accounts for eligible foster children. As of now, 25 governors have committed to participating, according to a recent count from the Department of Health and Human Services.

The aim is to ensure that these youths have a financial cushion when they age out of care, a safety net that many experts say is often missing. However, certain challenges remain, such as restrictions on accessing funds and potential impacts on eligibility for other adult services.

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“Overall, these accounts can offer advantages, but greater flexibility is needed to ensure that foster youth can access the funds at the pivotal moment of leaving care,” explained Daniel Hatcher, a law professor at the University of Baltimore School of Law who specializes in child welfare finance.

How Trump Accounts work

Trump Accounts — launched on July 4 and structured as tax‑advantaged investment accounts for children — allow parents, guardians, grandparents and other contributors to add up to $5,000 annually in after‑tax dollars, with contributions permitted until the year before the beneficiary turns 18. Children born between 2025 and 2028 who establish an account will receive an initial $1,000 deposit from the Treasury Department.

Employers may contribute up to $2,500 per employee each year, which forms part of the $5,000 annual contribution limit. Additionally, qualifying charities, as well as state and local governments, can make contributions that are excluded from the cap.

For foster children, states would act as legal guardians and open accounts on their behalf. These accounts may benefit from external donations or grants and could serve as repositories for certain federal benefits received by a small subset of participants.

In 2025, an estimated 331,747 children were in foster care, according to data released by HHS.

Approximately 15,000 youths exited the foster care system in 2025, HHS reports. In most states, adulthood is reached at age 18, and many offer extended care up to age 21 for eligible participants.

Existing services — such as rental assistance and workforce training vouchers — already support former foster youth as they transition to adulthood, and Trump Accounts could complement these efforts. Nevertheless, it remains uncertain whether they will fully realize the intended benefits.

“We welcome the focus on the long‑term needs of children and youth in the foster care system,” said Arnie Eby, executive director of the National Foster Parent Association.

“However, we are not fully certain that the benefits of these accounts will materialize as intended,” Eby noted.

Withdrawal rules may pose challenges

Trump Account assets are generally inaccessible before age 18. For foster children, this creates a hurdle because the funds become theirs upon reaching adulthood, yet accessing them may involve costs.

This is due to the rules that govern traditional individual retirement accounts. Withdrawals are subject to ordinary income tax rates — unless contributions were made with after‑tax dollars — and a 10% early‑withdrawal penalty may apply if funds are taken out before age 59½, unless an exception applies.

Permitted exceptions include qualified higher‑education expenses, up to $10,000 for a first home purchase, $5,000 for the birth or adoption of a child, $1,000 per year for personal emergencies, deductible medical expenses, and health‑insurance premiums while unemployed.

If a youth’s needs fall outside these categories, the penalty could diminish the account’s value at a critical time, experts warn.

“In the long term, flexibility will need to be addressed,” Eby said. “We do not want the assets to appreciate and then be eroded by restrictions on permissible uses.”

Charitable donations may boost balances

Trump Accounts could also provide foster children with resources they might otherwise lack.

Several philanthropic pledges have been announced, including a $6.25 billion commitment from Michael Dell, founder of Dell Technologies, and his wife, Susan, which would award $250 to each qualifying child born between 2016 and 2024 who resides in a ZIP code with a median income of $150,000 or less.

Other contributions are emerging at the state and local levels. Ray Dalio, founder of Bridgewater Associates, and his wife, Barbara, have pledged $250 for each eligible child in Connecticut, targeting those in ZIP codes with a median income of $150,000 or less.

Brad Gerstner, founder of Altimeter Capital and a key advocate for Trump Accounts, has committed $250 for qualifying children under age 5 in Indiana. Micron Technology has also pledged $250 per account for children in communities where the memory‑chip manufacturer operates.

Some foster children receive federal benefits

About 27,000 foster youths receive Social Security or Supplemental Security Income benefits, according to the Social Security Administration. Survivor benefits may arise from a deceased parent, while SSI may apply to individuals with disabilities who meet income eligibility.

When the foster‑care initiative was announced on June 11, Treasury Secretary Scott Bessent said states could direct survivor benefits or SSI into Trump Accounts.

Currently, many state child‑welfare agencies divert those federal payments to offset program costs. As of last year, only 11 states had policies to preserve survivor benefits for foster children. In December, the Administration for Children and Families, an agency within HHS, notified the remaining 39 state governors that they must cease intercepting those benefits.

Since then, the number of states that have agreed to stop diverting benefits has risen to 28, according to HHS data, while a few states continue to withhold SSI payments. It remains unclear whether additional states will alter their practices or use Trump Accounts as a repository for these assets.

States are already permitted to preserve benefits on behalf of foster children in checking or savings accounts and, where available, in Achieving a Better Life Experience (ABLE) accounts for those receiving SSI due to disability. An ABLE account can hold up to $100,000 without affecting SSI eligibility.

If states channel children’s federal benefits into Trump Accounts, the contributions will count toward the $5,000 annual cap, meaning any excess must remain in a separate account. Guidance on how SSI amounts will be treated in a Trump Account has not yet been released.

We just want to ensure that, as intended, these funds improve the life trajectory of anyone who has experienced the child welfare system.

Arnie Eby

Executive director of the National Foster Parent Association

Furthermore, while a Trump Account is not considered when determining SSI eligibility before age 18, according to the Social Security Administration, it is uncertain how these assets will be counted for means‑tested services once the child reaches adulthood.

“If a Trump Account interferes with continued eligibility for resources at age 18 or 21, depending on state thresholds, that could unintentionally worsen their situation,” Eby warned.

Overall, advocates welcome the attention to improving long‑term outcomes for children in foster care.

“We just want to ensure that, as intended, these funds improve the life trajectory of anyone who has experienced the child welfare system,” Eby said.

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