The Little-Noticed Exception in Trump Accounts

The White House recently announced a plan called 'Trump accounts.' Under this plan, about 70 million American children would each get $1,000 from the federal government placed into a savings account. Most news reports talked about how kids would be automatically signed up. But a quieter detail in the plan has some experts worried about big problems ahead.

The detail that got less attention is a new rule from the Treasury Department. This rule would let wealthy donors and large companies give shares of individual company stocks directly into children's accounts. A share of stock means owning a small piece of a company. When the company does well, the stock rises in value — but it can also drop very fast.

When Congress first created these accounts, the law said money had to go into broad index funds. An index fund spreads money across many companies at once, which keeps the risk low. If one company fails, the others can make up for it. Critics say the new Treasury rule goes against what Congress actually intended.

The Treasury Department disagrees with those critics. Officials argue they have the authority to accept gifts in different forms, including individual stocks, without converting them into index funds. The department also says donors can require that children hold onto the shares for up to five years before selling them. Still, many legal experts think this rule could face court challenges.

There is also a concern about how the rule could be used for political reasons. A business leader could give stock in their own company to children in a specific city or town. Parents might then feel pressure to support that company because their kids' savings depend on it. Critics say this could be used to influence local leaders and government decisions.

Some people have suggested a middle-ground solution to fix this problem. Donors could place their shares into a shared holding pool — called an escrow — for up to five years. After the waiting period, the government would sell those shares and put the money into index funds in the children's accounts. This way, donors get the long holding period they want, and children still benefit safely.

The big picture is that Trump accounts have real potential to help millions of children learn about money and saving for the future. But adding rules that could lead to lawsuits or be misused might put the entire program at risk. Experts say the goal should be to keep the program simple, fair, and safe for the children it is meant to help.