SpaceX gift from Elon Musk: How the Trump account rules might apply

Elon Musk said Monday he would give every American child a share of EspaceX next year. He appeared to suggest that the giveaway could land on Trump accounts – thanking Brad Gerstner, the architect of the program, for “helping to enable this” in a comment on X.

But if the shares are distributed through the new children’s investment accounts, the gift could come with significant strings attached.

Musk’s announcement comes weeks after the U.S. Treasury Department implemented guidelines for stock donations in Trump accounts, also known as 530A accounts. These include restrictions on the sale of donated shares: Children who receive them generally cannot sell them for five years, even if the company encounters financial difficulties.

The Treasury’s temporary regulations, subject to revision after public comment, are intended to encourage stock donations. But they also give donors unusual influence over children’s investments, according to lawyers and philanthropic experts interviewed by CNBC.

In the broader world of charitable giving, donors can generally express preferences for how their donations are handled, but the recipient organization or trustee retains final authority, said Carolyn Schenck, an attorney and former national fraud counsel at the IRS.

However, under the new Trump account rules, it is “the donor who dictates the terms of the donation,” she said.

Representatives for Musk, Gerstner and the Treasury Department did not respond to CNBC’s requests for comment on the proposed gift.

According to the Treasury, approximately 70 million Trump accounts have been created, including more than 60 million through a recent auto-enrollment effort. Trump accounts are available to all U.S. citizen children under the age of 18 with a valid Social Security number.

Musk would be the second philanthropist to publicly announce a pledge of shares in Trump accounts: SpaceX President Gwynne Shotwell pledged earlier this summer to use the Trump Account program to donate some 2 million shares. This gift has not yet been distributed.

Beneficiaries of the Trump account do not have the latitude to sell in circumstances that other investors might otherwise.

Under the new rules, families cannot decline shares gifted to Trump accounts and generally cannot sell them until five years or the end of the calendar year in which the recipient turns 17, whichever comes first. Early sales are only allowed in limited circumstances, such as certain corporate transitions or when the stock is officially delisted from a national securities exchange — and not when financial or legal issues arise that might prompt an investor to sell.

“Giving families more choice and more ability to hold the assets that they think are best for them and their children’s future … would be a good thing,” said Adam Michel, director of tax policy studies at the Cato Institute, a libertarian think tank. “But it’s not really that, because you don’t have a choice in what asset is deposited into your child’s account, and therefore you also don’t have the option to sell it during the five-year holding period.”

The temporary regulations also require that if any offered shares are sold too early, the trustee must purchase the same number and class of shares “as soon as practicable.”

This increases the risk of loss for beneficiaries if the stock price rises before the trustee repurchases the shares, according to Schenck. Ultimately, it is the beneficiaries who will bear this cost.

“If the trustee makes an investment mistake, the focus is usually on restoring value to the beneficiary. But here the focus seems to be on restoring the specific security itself,” said Schenck, who left the IRS in 2025 for the law firm Caplin & Drysdale.

CNBC has learned that the repurchase provision is intended to quickly correct trading errors, although the regulations do not explicitly state that goal or limit the requirement to accidental sales.

The temporary regulations cite donor interests. According to the text, “donors are attracted by the hope that a contribution of shares accompanied by a holding period of five years could make the beneficiaries and their families feel concerned about the fate of the company”.

Restricting sales virtually eliminates the risk to donors and their companies that Trump account beneficiaries will sell donated shares en masse, liquidating a position large enough to depress stock prices, according to Jane Ditelberg, chief tax strategist at Northern Trust.

“Certainly, for people whose wealth is very concentrated in one company and whose assets are in their personal pockets, it makes donations much easier,” she said.

Generally speaking, donors may receive a greater tax benefit by donating appreciated stock to a charity than by donating cash because they can claim the charitable deduction and avoid capital gains tax on the gains.

A Treasury official told CNBC that the rules aim to build long-term wealth for children, particularly in low-income families, and encourage giving. “The major donors we have engaged are motivated by a desire to help children build generational wealth and get a head start on their financial futures,” the official said in a written statement.

Treasury said it was in talks with donors to Trump accounts ranging from “small to mega” but has not identified any pledges for additional action since Shotwell’s announcement in July.

CNBC identified fewer than a dozen pledges from philanthropists, although about four dozen major employers have pledged to create seed accounts for their employees’ children.

In documents explaining the temporary rules, Treasury highlighted Michael and Susan Dell’s $6.25 billion cash commitment and unspecified “similar donations,” while acknowledging uncertainty about whether this level of donations will continue. “It is unclear whether this level of donations can be sustained over the long term or whether it will become more concentrated as the Trump accounts are launched,” the text said.

Trump account funds generally can only be invested in low-cost index funds and exchange-traded funds. In the temporary regulations, Treasury said direct tendered stock is different because it does not use account funds for the purchase.

But Ditelberg said a court could conclude that requiring an account to hold individual stocks remains an investment decision — an argument that could carry more weight after the Supreme Court overturned deference to Chevron. Thanks to the 2024 ruling, courts no longer have to defer to federal agencies’ interpretations of laws when the language is unclear.

“These accounts are going to have to remain invested in these stocks, and the question is whether that directly contradicts the terms of the law,” she said. “I can’t tell you how a court would rule, but I could say there is some dispute here.”

Ditelberg added that state law provides the right to forfeit an asset. She said it was unclear how the Trump account’s donation procedures would account for that right.

Schenck noted that the Treasury has broad authority to set the terms of the Trump accounts, and that it is the Treasury – not the original stock donor – that formally requires that the stock be held.

This arrangement also differs from traditional charitable donations. For example, donors who contribute stock to donor-advised funds can recommend how the assets are managed, but the sponsoring charity retains ultimate control, including the power to sell the stock. This is necessary to meet the IRS legal standards for receiving a tax deduction on a charitable contribution.

“A key principle is that the charity must have true control over the donated assets, including the ability to determine when to sell them, for the donation to be considered a full charitable contribution,” said Gil Nusbaum, administrative and legal director of the National Philanthropic Trust.

The broader question, experts say, is whether Treasury’s approach is consistent with the law passed by Congress.

“Musk’s gift would be incredibly generous, but it doesn’t change the fact that Congress wanted these accounts to be diversified,” Michel said. “It would not be a bad innovation for Congress to allow tax-free gifts of appreciated assets, but changes to the law should come from Congress, not an administrative decision.”