A Trump Account is a tax-advantaged savings account for children, not a brokerage or investment product

A Trump Account is a custodial savings vehicle designed to let parents, grandparents, or other adults set aside money for a child's future. The account holds cash or cash-equivalent investments and grows tax-deferred, meaning you do not pay federal income tax on the earnings until the child withdraws the money. The account is registered in the child's name but controlled by an adult custodian until the child reaches the age of majority (usually 18 or 21, depending on your state and the account type).

The core purpose is straightforward: accumulate money for a child without the tax drag that would apply to the same money in a parent's account. The child's lower tax bracket (or zero tax bracket if earnings stay below the standard deduction) means more of the growth stays in the account instead of going to taxes.

Key Takeaways

  • A Trump Account is a custodial account registered in a child's name, controlled by an adult until the child reaches age of majority, and designed to grow money tax-deferred.
  • Earnings in the account are taxed at the child's tax rate, not the parent's, which is usually lower and can mean zero tax if earnings stay below the standard deduction.
  • The child gains control of the account at age of majority (18 or 21 depending on state and account type), and can then withdraw or use the money for any purpose.
  • Trump Accounts are offered by banks, brokerages, and credit unions as either UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) accounts, with slightly different rules about what assets can be held.
  • Money deposited into a Trump Account counts toward the child's assets on financial aid forms, which can reduce the amount of aid the child receives in college.

How the tax advantage works

When you hold money in your own name, any interest, dividends, or capital gains are taxed at your marginal tax rate. When that same money sits in a Trump Account registered to your child, the earnings are taxed at the child's rate instead. For most children, that rate is zero or very low because their total income is below the standard deduction or falls into the lowest tax bracket.

The IRS does impose a "kiddie tax" rule: if a child is under 18 (or under 24 if a full-time student with limited income), unearned income above a certain threshold is taxed at the parent's rate, not the child's. That threshold changes each year; for 2024 it is $1,300. Income below that threshold is taxed at the child's rate or not taxed at all. Once the child turns 18 or 24, all income is taxed at the child's own rate, regardless of amount.

The practical effect: if you put $10,000 in a savings account earning 4% annually, you would owe tax on $400 per year. In a Trump Account for your child, that $400 is either not taxed or taxed at a much lower rate, leaving more money in the account to compound.

UTMA and UGMA accounts: the two main structures

Trump Accounts are typically opened as either UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) accounts. Both are custodial structures, but they differ in what assets can be held and how they work.

A UGMA account is the older structure and can hold cash, stocks, bonds, and mutual funds. A UTMA account is newer and can hold those same assets plus real estate, artwork, patents, and other property. Most financial institutions now offer UTMA accounts because they are more flexible. The rules vary slightly by state—some states have phased out UGMA entirely in favor of UTMA—so check with your bank or brokerage about which one they offer.

In both cases, you name yourself or another adult as the custodian. You control the account and make all investment decisions until the child reaches age of majority. At that point, the account automatically transfers to the child's control. You cannot take the money back or redirect it; once assets are in the account, they belong to the child.

What happens when the child turns 18 or 21

The age at which the child gains control of the account depends on the account type and your state. With a UGMA account, control typically transfers at age 18 or 21 (varies by state). With a UTMA account, the custodian can sometimes delay transfer until age 21 or 25 (again, varies by state). Check your state's law or ask your bank which age applies to your account.

Once the child has control, they can withdraw the money for any reason—college, a car, travel, or anything else. There is no restriction on how the money is used. If the child does not need the money immediately, they can leave it invested and continue to benefit from tax-deferred growth. However, once the account is in the child's name and under their control, you have no say in how they use it.

Impact on financial aid and other considerations

Money in a Trump Account counts as the child's asset on the Free Application for Federal Student Aid (FAFSA). Assets held in a child's name reduce the amount of need-based financial aid the child may receive. The formula assumes a higher percentage of the child's assets will go toward education than a parent's assets, so having money in a child's account can reduce aid may be able to access more than having the same money in a parent's account.

This is an important trade-off to understand before opening an account. The tax savings may be offset by lower financial aid if the child will attend college. Some families choose to hold education savings in a parent's name or in a 529 plan (which has different financial aid treatment) for this reason.

Trump Accounts also have no contribution limits—you can deposit as much as you want in a given year. However, gifts over a certain amount ($18,000 per person in 2024, but this changes annually) may trigger federal gift tax reporting, though not necessarily a tax bill. If you plan to make large gifts, consult a tax professional about the implications.

How to open a Trump Account

Most banks, credit unions, and brokerages offer Trump Accounts. The process is straightforward: visit the institution, ask to open a UTMA or UGMA account, and provide the child's Social Security number and date of birth. You will name yourself as custodian and decide what type of investments to hold (savings account, money market, stocks, mutual funds, etc.).

Some institutions have minimum opening balances or monthly fees; others do not. Compare options at a few banks or brokerages before choosing. Once the account is open, you can deposit money whenever you want and direct how it is invested. The child receives statements showing the account balance and activity, though you control all decisions until they reach age of majority.

Frequently Asked Questions

Can I take money out of a Trump Account if I need it?

Technically, yes—you are the custodian and control the account. However, any withdrawal must be for the child's benefit. Withdrawing money for your own use is considered a breach of the custodial duty and can have tax consequences. The money belongs to the child, not to you, even though you control it.

What happens if the child does not go to college?

There is no requirement to use the money for college. Once the child has control of the account, they can use it for any purpose: a down payment on a home, starting a business, travel, or anything else. The account is simply a savings vehicle, not tied to any specific use.

Can I open a Trump Account for a grandchild or niece?

Yes. You do not have to be the parent to open a custodial account. Any adult can open a UTMA or UGMA account for any child and name themselves as custodian. The child's parent or legal guardian does not need to approve it, though it is good practice to discuss it with them first.

Is a Trump Account the same as a 529 college savings plan?

No. A 529 plan is specifically designed for education expenses and has different tax rules and financial aid treatment. A Trump Account is a general-purpose custodial account with no restriction on how the money is used. A 529 plan may be better if you are certain the money will go toward education; a Trump Account is better if you want flexibility.

What if I die before the child reaches age of majority?

The account does not automatically close. Your estate or the person you name as successor custodian (if your state allows it) takes over management of the account until the child reaches age of majority. Discuss this with your estate planning attorney to make sure the account is properly addressed in your will.