Should American kids in Israel open a Trump account?

For US citizens living in Israel, parents have a new decision to make. Trump Accounts are a newly created type of traditional IRA for minors, owned by the child and managed by an adult, created as part of President Trump’s 2025 One Big Beautiful Bill Act. Should we take advantage of these new accounts and open one for each of our children?

This guide will break down what a Trump Account is, tax considerations to be aware of, and whether it really makes sense to consider opening one of these accounts at all. As always, nothing here should be taken as personal tax, investment, or legal advice.

What is it and who is eligible?

Starting July 5, 2026, any child under 18 years old with a US Social Security number is eligible to open a Trump Account. A Trump Account is essentially a custodial IRA — a tax-advantaged retirement account managed by a parent or guardian on behalf of a child.

Additionally, if you had or have a child born between January 1, 2025, and December 31, 2028, they will receive a one-time $1,000 grant when you open a Trump Account for that child. With some similarities to Israel’s “savings account for every child” – program, the goal is to get children off to a solid financial start by tapping into the magic of investing from the youngest of ages.

What are the benefits?

The key benefit is the free $1,000 grant for any child born during the eligible period (“seed money”). It is possible Congress will choose to extend this benefit in the future to ensure newborns born after 2028 continue to receive the grant.

In addition, the account grows with very low investment fees and is tax-deferred until retirement according to US tax rules. This allows the child to grow and compound their investment for decades without having to pay taxes until they eventually withdraw money at retirement. Essentially, it is an account designed to jump-start retirement savings, practically and psychologically, for every American child long before the child is actually working.

What are the drawbacks?

Compared to some of the popular alternatives for saving & investing for children, there are significant drawbacks that need to be considered before opening an account – especially for those of us living in Israel:

• $5000 maximum contribution amount – The total amount that can be contributed to a child’s account by all donors combined each year is capped at $5,000. This amount will increase with inflation after 2027.
• Severe withdrawal limitations – Before the child turns 18, money cannot be withdrawn from the account in almost all cases. At 18, withdrawals are limited by IRA rules. This means any withdrawals before retirement age are taxable and incur an additional 10% penalty unless they meet a narrow list of exceptions including first-time home purchase costs up to $10,000, birth or adoption costs up to $5,000, qualifying medical expenses, disability, or terminal illness.
• Investment restrictions – Investment options will be limited to mutual funds or ETFs that track the S&P 500 or another equity index with at least 90% invested in US companies. Those looking to build a more globally diversified portfolio will likely be unsatisfied with the options.
• Israeli tax grey zone – IRA treatment under the Israeli tax code is very unclear, and these accounts would fall into that same category. While many Israeli accountants may be willing to treat them as tax-deferred pension vehicles today, that could change for the worse in the future if the Israeli Tax Authority ever issues formal guidance on the topic. You can take a deep dive into this topic in our full guide, but for the TL;DR, using a US retirement vehicle is not without risk from an Israeli tax perspective.
• Gift tax reporting – While this may be amended in the future, current tax guidance suggests that any contributions made to this account will automatically obligate the donor — parent, grandparent, etc. — to additional tax reporting obligations in the US, including filing a gift tax return, and will count against their lifetime gift tax exemption. This does not necessarily mean gift tax is owed, but it may create additional filing requirements.
  

Should you open one if you are eligible for the free $1,000?

Why turn down free seed money for your child? At a minimum, it is a free gift and a valuable educational tool that your child can eventually use to learn more about investing and getting started. Opening and managing the account should be fairly straightforward. It probably makes sense for Americans in Israel with children born between 2025 and 2028 to take advantage of this grant.

Should you open one for a child born before January 1st, 2025?

In most cases, the answer is no. Given that there is no free $1,000 grant for your child, and given the many drawbacks listed above, is this really the best option for your child?

One way Israel is very different from the US is its retirement system. In Israel, pension contributions by both the employee and employer are significant and mandatory. The general advice of ensuring 15% of your income is put away for retirement each month is exceeded by all Israeli employees. Given that, does it really make sense to put more money away for an Israeli child in a severely restricted retirement account?

The fact is that most kids and parents living and working in Israel are more likely to want these funds in an easily accessible account with no withdrawal restrictions. Savings goals that come long before retirement age, like buying a first home, are likely to be a higher priority.

Should you add additional funds to the account?

For all the reasons mentioned above, most people will likely consider investing funds for their children elsewhere. The most common choices are regular taxable custodial accounts or keeping the funds invested in the parents’ own account, eventually to be gifted to the child.

In a very specific case, contributions to the account may make sense. One of the unique aspects of Trump Accounts is that they can be funded by a US-based employer or employee using pre-tax payroll deductions. For a parent or grandparent who works for a US company that specifically offers this benefit, they may be inclined to take advantage.

How to open a Trump account

Trump Accounts are set to become available on July 4, 2026. To get started now, fill out Form 4547 (named after the 45th and 47th POTUS) , on the official government site. We will update this guide with additional details once the full process is open.