MIAMI — Nearly 6 million children have been signed up for Trump Accounts, a new type of tax-advantaged savings and investment account for minors set to launch on July 4. The accounts, also known as 530A accounts, allow contributions from family members, employers, and certain organizations without requiring the child to have earned income.

Trump Accounts mostly function like an individual retirement account, with some exceptions. Parents, guardians, grandparents, and others can contribute up to $5,000 per year in after-tax dollars until the year before the beneficiary turns 18. Employer contributions of up to $2,500 per year are permitted within that limit and are not treated as taxable income, according to the IRS. Qualifying charitable organizations and state and local governments may also contribute amounts that do not count toward the annual cap.

The Treasury Department will provide a $1,000 seed deposit for eligible children, along with any charitable gifts, before taxes are paid. However, pretax funds—including the Treasury seed, employer matches, and government contributions—will be subject to ordinary income taxes upon withdrawal. All funds in the accounts grow tax-deferred.

"Trump Accounts create a legal backdoor into a Roth IRA that does not require a child to have earned income, something that was simply not possible before," said Adam Bergman, founder of IRA Financial and a tax attorney based in Miami. "Right now, traditional and Roth IRAs are locked away from most minors because they strictly require documented earned income," Bergman said.

When the child turns 18, the standard rules for traditional IRAs apply. Withdrawals before age 59½ generally incur income taxes and a 10% penalty, though exceptions exist for first-time home purchases and education expenses.

"They generally should be thought of as retirement accounts first, and not for other purposes," said Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis. If the money in a Trump Account is largely earmarked for higher education, 529 college savings plans "have a clear advantage in almost all circumstances," Levine said.

Trump Accounts may be used for a Roth individual retirement account conversion strategy, which entails transferring pretax or nondeductible IRA funds held in the Trump Account to a Roth IRA. The child would owe income taxes to convert pretax or nondeductible funds from a Trump Account to a Roth IRA. "Converting funds to a Roth IRA would allow them to grow tax-free thereafter," said Ben Henry-Moreland, a certified financial planner with advisor platform Kitces.com.