Elon Musk to Gift SpaceX Shares to Kids via Trump Accounts with Restrictions

Elon Musk said on Monday that he will give every kid in America a share of SpaceX next year. Musk appeared to suggest the gift could go into Trump Accounts by thanking program architect Brad Gerstner for "helping enable this" on X. The Treasury Department issued temporary regulations for stock donations to Trump Accounts, also known as 530A accounts, weeks before Musk's announcement. The regulations remain subject to revision after public comment.

Under the rules, families cannot refuse donated stock and generally cannot sell 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 circumstances, including certain corporate transitions or formal delisting from a national securities exchange, not emerging financial or legal problems. The regulations require trustees to repurchase the same number and class of shares "as soon as practicable" if gifted stock is sold too early. Carolyn Schenck, an attorney and former IRS national fraud counsel, said beneficiaries bear the risk and cost if prices rise before trustees repurchase the shares. Schenck said the requirement focuses on restoring the specific security rather than restoring value to the beneficiary after a fiduciary's investment mistake. The repurchase provision is intended to correct trading errors quickly, although the regulations neither explicitly state that purpose nor limit the requirement to accidental sales.

Trump Accounts are available to children with U.S. citizenship under age 18 who have valid Social Security numbers. Treasury said about 70 million accounts have been created, including more than 60 million through a recent auto-enrollment effort. Musk would be the second philanthropist to publicly announce a stock pledge to Trump Accounts, following SpaceX President Gwynne Shotwell's pledge earlier this summer of some 2 million shares. Shotwell's gift has not yet been distributed. Representatives for Musk, Gerstner and Treasury did not respond to requests for comment on the proposed gift.

Lawyers and philanthropic experts said the rules give donors unusual influence over children's investments. Schenck said charitable recipients or trustees typically retain final authority over gifts, but Trump Account donors dictate the terms of stock gifts. Adam Michel, director of tax policy studies at the Cato Institute, said families should have more investment choices rather than having no choice over deposited stock or ability to sell during the five-year holding period. The temporary regulations say donors hope a five-year holding period will make recipients and families feel invested in the corporation's future. Jane Ditelberg, chief tax strategist at Northern Trust, said sale restrictions virtually eliminate the risk that recipients will collectively sell enough donated shares to depress prices. Ditelberg said the restrictions make giving easier for donors whose personal wealth is highly concentrated in a company. Donors generally receive greater tax benefits from donating appreciated stock to charity than cash because donors can claim a charitable deduction and avoid capital gains tax on the gains.

A Treasury official said the rules aim to encourage donations and build long-term wealth for children, especially children in lower-income families. The official said major donors Treasury has engaged want to help children build generational wealth and establish a financial foundation. Treasury has said discussions involve donors ranging from "small to mega," but Treasury has not identified additional stock pledges since Shotwell's July announcement. Fewer than a dozen philanthropists have been identified as making pledges. About four dozen major employers have committed to funding accounts for employees' children. Treasury's explanatory documents cited Michael and Susan Dell's $6.25 billion cash pledge and unspecified similar donations, while questioning whether such giving will persist beyond the accounts' launch.

Trump Account funds generally may be invested only in low-cost index funds and exchange-traded funds. Treasury said directly contributed stock differs because account funds do not finance the stock purchase. Ditelberg said a court could regard mandatory retention of individual shares as an investment decision and potentially find grounds to challenge the rules. The Supreme Court's 2024 decision overturning Chevron deference means courts no longer must defer to federal agencies' interpretations of unclear statutory language. Ditelberg said the decision could strengthen that argument, while declining to predict how a court would rule. Ditelberg also said state law grants a right to disclaim an asset, but the donation procedures' accommodation of that right is unclear.

Schenck noted that Treasury has broad authority to set account terms and that Treasury, rather than the original donor, formally requires retention of donated shares. Donors to donor-advised funds can recommend asset management, but sponsoring charities must retain ultimate control, including authority to sell, to meet IRS charitable deduction standards. Gil Nusbaum, chief administrative and legal officer of National Philanthropic Trust, said genuine charitable control over donated assets is essential for a completed charitable contribution. Experts said the broader question is whether Treasury's approach aligns with the law Congress enacted. Michel said Musk's gift would be generous, but Congress intended Trump Accounts to hold diversified investments. Michel said allowing tax-free gifts of appreciated assets could be a useful innovation, but Congress, rather than administrative action, should change the law.