What a Trump Account Does

A Trump Account is a tax-advantaged savings account designed to hold money set aside for a child's future. You (or a relative, or anyone) deposits money into the account. That money grows through interest or investment returns over time. When the child reaches age 18, they can withdraw the funds for any purpose — college, a car, a down payment, or anything else. The account holder controls the money until the child reaches the age of majority in their state, which is usually 18 or 21.

The core mechanic is simple: money goes in, grows tax-free or tax-deferred depending on the account type, and comes out when the child is old enough to use it. The account is held in the child's name but managed by an adult custodian — typically a parent, grandparent, or other trusted person.

Key Takeaways

  • Money deposited into a Trump Account grows without being taxed each year, which means more of the growth stays in the account instead of going to the IRS.
  • The account is opened in the child's name with an adult custodian managing it, and the child gains full control when they reach the age of majority in their state.
  • Annual gift tax rules limit how much one person can deposit per child per year without filing a gift tax return, though married couples can give twice as much.
  • The child can withdraw money for any reason once they have control of the account — there are no restrictions on how the funds are spent.
  • Investment choices and account fees vary by financial institution, so comparing options before opening an account can affect long-term growth.

How Money Enters and Grows in the Account

You open a Trump Account at a bank, brokerage, or investment firm in the child's name. You then deposit money — as little as $25 or $50 at many institutions, or as much as you want in a single deposit. The account can hold cash, stocks, bonds, mutual funds, or other investments depending on where you open it.

The money grows through interest (if held in savings) or investment returns (if invested in stocks or funds). Critically, you do not pay federal income tax on that growth each year. If the account earns $500 in interest or investment gains, that $500 stays in the account and continues to grow. In a regular savings account or taxable investment account, you would owe tax on that $500, reducing what stays invested. This tax deferral is the primary financial advantage of the account structure.

You can make multiple deposits over time. There is no annual limit on total deposits into the account itself — the limit applies only to how much you can give without triggering gift tax reporting requirements (see the section below on gift tax rules).

Gift Tax Rules and Annual Contribution Limits

The IRS allows you to give money to another person without paying gift tax, up to a certain amount per year. For 2024, that amount is $18,000 per person per year. If you are married, your spouse can give another $18,000, for a total of $36,000 per child per year without either of you filing a gift tax return.

If you deposit more than $18,000 in a single year (or $36,000 if married), you must file Form 709 with the IRS. Filing the form does not mean you owe tax — it simply reports the excess gift. The excess counts against your lifetime gift and estate tax exemption, which is currently $13.61 million per person. For most people, this exemption is so large that filing the form has no practical tax consequence.

These limits reset each January 1. If you deposit $20,000 in December and $20,000 in January of the following year, both deposits are allowed — the first counts toward the prior year's limit and the second toward the new year's limit.

When the Child Takes Control and What They Can Do

The age at which the child gains control of the account depends on state law. In most states, this is age 18. In some states, it is age 21. A few states allow the custodian to extend control until age 25 if the account was opened under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) — the two legal frameworks most Trump Accounts use.

Once the child reaches that age, they own the account outright. They can withdraw all the money, some of it, or none of it. There are no restrictions on how they spend it. They can use it for college, buy a car, pay rent, invest it further, or spend it however they choose. The custodian's control ends completely.

This is different from some other savings vehicles (like 529 college savings plans) where withdrawals for non-education purposes trigger tax penalties. A Trump Account has no such restrictions.

Taxes When the Child Withdraws Money

When the child withdraws money after reaching the age of majority, they do not owe tax on the original deposits — that was money you already paid tax on (or gave as a gift). They owe tax only on the growth (interest or investment gains) that occurred while the account was open.

The tax treatment of that growth depends on how long the child has held the account and what type of investments are inside it. If the account holds stocks or mutual funds that were held for more than one year, the gains are taxed as long-term capital gains, which are taxed at lower rates than ordinary income. If the child withdraws within one year of purchase, gains are taxed as short-term capital gains at ordinary income tax rates.

The child reports this on their own tax return in the year they withdraw. The custodian is no longer involved in tax reporting once the child takes control.

Custodian Responsibilities and Account Management

As the custodian, you have a legal duty to manage the account for the child's benefit. This means you cannot use the money for your own purposes, and you cannot make reckless investment choices. In practice, this means you should invest the money reasonably — not gambling it away or putting it all into a single speculative stock.

You can make deposits, choose investments, and direct withdrawals while the child is a minor. Some custodians withdraw money to pay for the child's education, medical care, or other needs. Others leave the account untouched and let it grow. Both approaches are legal as long as the money is used for the child's benefit or left to grow for their future.

You do not have to file a separate tax return for the account. The child's Social Security number is used, and income is reported on the child's tax return (or yours, depending on the amount and the child's age). Your financial institution will send tax forms each year showing the account's earnings.

Comparing Trump Accounts to Other Savings Options

A Trump Account differs from a 529 college savings plan in one key way: there is no penalty for using the money for non-education purposes. With a 529, if you withdraw money for anything other than may have access to education expenses, the earnings portion is taxed plus a 10% penalty. With a Trump Account, you can withdraw for any reason with no penalty.

A Trump Account also differs from a regular savings account or taxable investment account because the growth is not taxed each year. In a regular account, you owe tax on interest or investment gains annually, even if you do not withdraw the money. In a Trump Account, tax is deferred until the child withdraws.

The trade-off is flexibility: a 529 offers state tax deductions in many states (reducing your current tax bill), while a Trump Account does not. A Trump Account offers complete control over when and how the money is used, while a 529 penalizes non-education withdrawals. Choose based on whether you want to lock in a tax deduction now or preserve flexibility later.

Frequently Asked Questions

Can I take money out of the account before the child reaches the age of majority?

Yes. As custodian, you can withdraw money at any time. However, you should only do so for the child's benefit — education, medical care, living expenses, or similar needs. Withdrawing for your own use violates your custodial duty and could create legal or tax problems. If you withdraw for the child's benefit, that withdrawal is not taxed to you, but any earnings are taxed to the child.

What happens to the account if the custodian dies?

The account belongs to the child, not the custodian, so it does not go through your estate. However, you should name a successor custodian in your will or trust to manage the account if you die before the child reaches the age of majority. If you do not, a court may appoint one, which can delay access to the funds.

Does a Trump Account affect financial aid for college?

Yes. Money in a Trump Account is counted as the child's asset on the Free Application for Federal Student Aid (FAFSA). Assets owned by the student reduce financial aid may be able to access more than assets owned by parents. A 529 plan owned by a parent is treated more favorably for financial aid purposes, so if college funding is your primary goal, a 529 may be better.

Can I change the beneficiary of a Trump Account to a different child?

No. A Trump Account is opened for a specific child and cannot be transferred to another child. If you want to save for multiple children, you must open separate accounts for each one.

What fees should I expect when opening a Trump Account?

Fees vary widely by institution. Some banks charge no annual fee for custodial accounts. Brokerages may charge annual account maintenance fees (typically $25 to $50) or transaction fees for buying and selling investments. Some charge a percentage of assets under management. Compare fee structures before opening an account, as fees reduce long-term growth.