Musk to gift SpaceX stock via Trump Accounts with lock-in

The U.S. Department of the Treasury's temporary regulations for Trump Accounts impose a five-year holding period on donated stock, a constraint that applies to Elon Musk's announced pledge to gift SpaceX shares to every child in the United States next year. Musk stated on Monday that the distribution would likely use these accounts, thanking Brad Gerstner, an architect of the program, for helping enable the initiative in a post on X.

Under the proposed framework, children who receive donated stock generally cannot sell it for five years, a restriction that persists even if the issuing company faces financial difficulties. Treasury guidelines state that families cannot refuse stock gifted to these accounts and are barred from selling until the earlier of five years or the end of the calendar year in which the beneficiary turns 17. Early sales are permitted only in limited scenarios, such as specific corporate transitions or formal delisting from a national securities exchange, but not when financial or legal problems emerge.

The regulations grant donors unusual influence over children's investments, a departure from traditional charitable giving where trustees retain final authority. Carolyn Schenck, an attorney and former national fraud counsel at the IRS, noted that under these rules, the donor dictates the terms of the gift. If gifted stock is sold prematurely, the trustee is mandated to repurchase the same number and class of shares as soon as practicable. This provision increases beneficiaries' risk of loss if share prices rise before repurchase, a cost Schenck says would ultimately fall on the beneficiary.

Musk would become the second major figure to pledge stock to Trump Accounts. SpaceX President Gwynne Shotwell pledged to gift approximately 2 million shares earlier this summer, though that distribution has not yet occurred. According to Treasury, about 70 million Trump Accounts have been created, with over 60 million resulting from a recent auto-enrollment effort. The accounts are available to all U.S. citizens under age 18 with valid Social Security numbers.

Jane Ditelberg, chief tax strategist at Northern Trust, explained that restricting sales protects donors from the risk of a mass sell-off depressing share prices. She also raised legal questions about whether requiring accounts to hold individual stocks contradicts statutory requirements for diversification, particularly following the Supreme Court's overturning of Chevron deference. Ditelberg noted that state laws grant rights to disclaim assets, leaving unclear how Trump Account procedures would accommodate such claims.

A Treasury official stated in a written response that the rules aim to build long-term wealth for children and encourage donations. The department has engaged donors ranging from small to mega but has not identified additional stock pledges since Shotwell's announcement. While Treasury documents reference Michael and Susan Dell's $6.25 billion cash pledge, they acknowledge uncertainty about whether this level of giving can be sustained long-term.