Elon Musk stated on Monday that he will give each child in the United States one share of SpaceX stock next year. He seemed to imply that this gift might be included within the Trump Accounts – on X, he posted a message thanking one of the designers of this project, Brad Gerstner, calling him “helpful in making this possible.”
But if these stocks are distributed through new child investment accounts, this gift may come with quite a number of restrictions.
Just a few weeks have passed since Musk made this announcement, following the release by the U.S. Treasury Department of guidelines for donating stocks to what is known as Trump Accounts accounts, also referred to as 530A accounts. These guidelines include restrictions on the sale of donated stocks: children who receive the stocks are generally not allowed to sell them for five years, even if the company encounters financial difficulties.
The temporary regulations of the Ministry of Finance may still be revised after public consultation, with the aim of encouraging stock donations. However, according to lawyers and charity experts interviewed by CNBC, these regulations also grant donors an unprecedented level of influence over children's investments.
In the broader field of charitable donations, donors usually have the ability to express their preferences regarding how their donated assets are managed, but the ultimate decision still rests with the receiving organization or trustee, according to Carolyn Schenck, former National Tax Law Advisor against Fraud for the Internal Revenue Service and current lawyer.
However, under the new Trump Account rules, 'it is the donor who specifies the terms of the gift,' she said.
Neither Musk, Gerstner, nor representatives from the Treasury Department have responded to requests for comments on this proposed donation from CNBC.
According to data from the Treasury Department, approximately 70 million Trump Accounts accounts have been created, of which over 60 million were opened through recent automatic registration measures. Trump Accounts is available to all American citizen children under the age of 18 who possess a valid social security number.
Elon Musk will become the second philanthropist to publicly announce a donation of shares to Trump Accounts. SpaceX's president, Gwynne Shotwell, earlier this summer, pledged to donate approximately 2 million shares through the Trump Account project. This donation has not yet been disbursed.
What do restrictions on stock sales mean for children?
The beneficiaries of Trump Account do not have the same freedom to sell in certain circumstances as other investors.
According to the new regulations, families cannot refuse donations of stocks to Trump Accounts. These stocks can generally only be sold at the end of five years or when the beneficiary reaches the age of 17, whichever comes first. Prior to that, early sale is only permitted under limited circumstances, such as during corporate reorganizations or when the stocks are officially delisted from a national stock exchange; however, financial or legal issues that might prompt investors to sell are not considered within these permitted circumstances.
"Giving families more choices and enabling them to hold the assets they believe are most suitable for their own and their children's future... that would be a good thing," said Adam Michel, the director of tax policy research at the liberal think tank Cato Institute. "But that's not really the case, because you can't choose the assets to deposit into your child's account, and you also can't sell them during the five-year holding period."
The temporary regulations also require that if any donated shares are sold prematurely, the trustee must purchase an equal number of shares of the same category as soon as possible.
According to Schenck, this will increase the risk of loss for the beneficiaries if the stock price rises before the trustee repurchases it, and the ultimate costs will be borne by the beneficiaries.
"If the trustee makes an investment mistake, the focus is usually on restoring the value for the beneficiary. But in this case, it seems that the focus is on restoring that particular security itself," said Schenck. She left the National Tax Service in 2025 to join the law firm Caplin & Drysdale.
CNBC It is understood that the original intention of this repurchase clause was to quickly correct trading errors, but the relevant regulations do not explicitly state this purpose, nor do they limit this requirement to cases of accidental sales.
Donor incentives behind the holding rules
Provisionally, the interests of donors are taken into consideration. According to the text, 'Donors are attracted by the prospect that a stock donation with a five-year holding period may make the recipients and their families feel closely connected to the fate of the company.'
Northern Trust, the Chief Tax Strategist, stated that imposing restrictions on sales has virtually eliminated the risks faced by donors and their companies, namely the possibility that recipients of Trump Account would sell off their shares en masse, thereby liquidating large positions and driving down stock prices.
"Of course, for those who hold a large concentration of wealth within a single company, if that wealth were still in their personal pockets, it would make donating much easier," she said.
Generally speaking, donating appreciated stocks to charitable organizations usually brings greater tax benefits compared to donating cash, as donors can claim a charitable deduction and avoid paying capital gains tax on the appreciation portion.
An official from the Ministry of Finance told CNBC that these rules are aimed at building long-term wealth for children, especially those from low-income families, and encouraging donations. In a written statement, the official said, "The main donors we have contacted all wish to help children build intergenerational wealth and gain an advantage in their financial future."
The Ministry of Finance stated that it is in discussions with donors ranging from "small to extremely large" amounts of Trump Accounts, but since the announcement in July of Shotwell, no additional stock commitments have been confirmed.
CNBC According to statistics, fewer than a dozen philanthropists have made commitments, however, about forty large employers have pledged to contribute funds to the accounts of their employees' children.
In the document explaining the temporary rules, the Ministry of Finance mentioned the $6.25 billion in cash donations promised by Michael and Susan Dell, as well as "similar donations" that were not specified in detail. It also acknowledged the uncertainty regarding whether such donation levels would continue to exist. The document states: "It is currently unclear whether this level of donation can be maintained in the long term, or whether it is only concentrated during the launch phase of Trump and accounts."
Legal Issues of Stock Donations
Trump Account Funds are usually only allowed to be invested in low-cost index funds and exchange-traded funds. The Ministry of Finance has clearly stated in the temporary regulations that directly donated stocks are different, as this does not involve the use of account funds for purchasing.
However, Ditelberg indicates that courts may determine that holding individual stocks still constitutes an investment decision – this argument may carry more weight now that the Supreme Court has overturned Chevron and deference. Due to this 2024 ruling, courts no longer have to comply with federal agencies' interpretations of regulations when the legal language is unclear.
"These accounts will have to continue holding these stocks, and the question is whether this directly conflicts with the legal provisions," she said. "I can't tell you how the court will rule, but I can say that there is room for challenge here."
Ditelberg added that state law grants the right to waive an asset. She stated that it is currently unclear how Trump Account's donation process will be compatible with this right.
Schenck pointed out that the Ministry of Finance has extensive authority to set terms for Trump Accounts, and it is the Ministry of Finance, rather than the initial stock donors, that officially requires the holding of these stocks.
This arrangement also differs from traditional charitable donations. For example, donors who contribute stocks to donor-advised and funds can suggest how the assets should be managed, but the charitable organizations that sponsor the fund retain ultimate control, including the right to sell the stocks. This also meets the requirements of the U.S. Internal Revenue Service (IRS) regarding legal standards for pre-tax deductions for charitable donations.
National Philanthropic Trust Chief Executive and Legal Officer Gil Nusbaum stated: "A key principle is that charitable organizations must have real control over the donated assets, including the ability to decide when to sell them, so that the gift can be considered a completed charitable donation."
Experts say that a more fundamental issue is whether the Treasury Department's actions are in compliance with the laws enacted by Congress.
Michel said, "Elon Musk's gifts will be very generous, but that does not change the fact that the intention of Congress is to achieve diversified investment through these accounts. Allowing tax-free gifts of appreciated assets is not a bad innovation, but legal changes should be made by Congress, not through executive orders."
