What a Trump Account Is and How It Works
A Trump Account is a tax-advantaged savings account designed specifically for children, created under state law to help families set aside money for a child's future. The account holder—usually a parent, grandparent, or guardian—deposits money that grows tax-free as long as it stays in the account and is used for the child's benefit. The money can be withdrawn at any time, but if you take it out for something other than the child's needs, you may owe taxes and a penalty on the earnings portion.
The structure is straightforward: you open an account in the child's name (with your Social Security number as the custodian), deposit funds, and the money sits there earning interest or investment returns depending on how the account is set up. Unlike a regular savings account at a bank, a Trump Account often offers investment options—you can choose how conservative or aggressive the growth strategy is. The account belongs to the child legally, but you control it until they reach the age of majority (usually 18 or 21, depending on your state).
Each state runs its own Trump Account program, so the rules, investment options, and contribution limits vary by location. Some states offer accounts through their 529 college savings plans, while others have separate custodial savings programs. You will need to check your state's specific program to learn what is available where you live.
Key Takeaways
- Trump Accounts are state-run savings accounts for children where money grows tax-free if used for the child's benefit.
- You control the account as custodian until the child reaches the age of majority, at which point ownership transfers to them.
- Withdrawals for non-may have access to purposes may trigger taxes and penalties on the earnings, though the principal you deposited is always yours to withdraw.
- Each state operates its own program with different investment options, contribution limits, and rules, so you must check your state's specific offerings.
- Trump Accounts are separate from regular savings accounts and often allow you to choose investment strategies that match your timeline and risk tolerance.
Who Can Open and Contribute to a Trump Account
Any adult can open a Trump Account for a child—parents, grandparents, aunts, uncles, or family friends. You do not have to be related to the child, though most programs require you to be a legal custodian or have the custodian's permission. The child must have a Social Security number, and you will need yours as well to set up the account.
There is no limit on who can contribute once the account is open. A grandparent can fund it, then a parent can add money later, then an aunt can make a deposit—multiple people can feed the same account. Some states set annual or lifetime contribution caps (these vary widely), so check your state's rules before you assume you can deposit unlimited amounts. The account is in the child's name, but you retain control as custodian.
Tax Treatment and Growth of Funds
Money in a Trump Account grows tax-free, meaning you do not pay federal income tax on the interest, dividends, or investment gains as long as the funds stay in the account. This is the primary advantage over a regular savings account, where you would owe taxes on earnings each year. The tax-free growth compounds over time, so the longer money sits in the account, the more you benefit from this feature.
The tax-free status applies only if the money is used for the child's benefit. The IRS defines this broadly—it can include education, medical care, housing, food, or other necessities. If you withdraw money for something unrelated to the child's needs, you will owe income tax on the earnings portion plus a 10 percent penalty. The principal (the money you deposited) is always yours to withdraw without penalty, but the growth is what gets taxed if misused.
When the child reaches the age of majority, the account transfers to them, and they become responsible for any taxes owed on future withdrawals or growth. If the account is not used by a certain age (rules vary by state), some programs require the remaining balance to be distributed, which may trigger taxes at that time.
Contribution Limits and Annual Rules
Contribution limits vary significantly by state. Some states allow you to deposit several thousand dollars per year per child, while others have higher or lower caps. A few states have no annual limit but do set a lifetime maximum—for example, you might be able to contribute up to $100,000 total over the child's lifetime, but only $10,000 per year. You will need to contact your state's program directly or check its website to learn the specific numbers that apply to you.
Some Trump Account programs also tie contribution limits to federal gift tax rules. If you stay under the annual gift tax exclusion (which changes yearly), you avoid filing gift tax paperwork. Exceeding that amount does not mean you owe tax, but it does require you to file a form with the IRS. A tax professional can help you understand whether this affects your situation.
What Happens When the Child Turns 18 or 21
When the child reaches the age of majority (18 in most states, 21 in a few), the account legally becomes theirs. You lose control, and they can withdraw the money for any reason without penalty or tax consequences—the tax-free status ends once they take ownership. Some programs allow you to extend your control past 18 if you choose, but this varies by state.
If money remains in the account after the child takes ownership, they decide what to do with it. They can leave it there to continue growing, withdraw it all at once, or take it out gradually. Any growth that occurs after they take ownership will be subject to taxes on earnings, so the tax-free advantage applies only to growth that happened while you were custodian.
How Trump Accounts Differ from Other Savings Options
A Trump Account is different from a regular savings account because of the tax-free growth and the legal structure. In a regular savings account, you pay taxes on interest each year. In a Trump Account, you pay nothing as long as the money stays in and is used for the child's benefit. This makes Trump Accounts more powerful for long-term savings, especially if you have 10 or more years before the child needs the money.
Trump Accounts are also different from 529 college savings plans, which are specifically for education expenses. A Trump Account can be used for education, but it can also be used for medical care, housing, food, or other needs. This flexibility makes Trump Accounts useful if you are not certain the child will go to college or if you want to save for multiple types of expenses.
Unlike a trust, a Trump Account does not require a lawyer to set up and does not involve complex legal documents. It is simpler and cheaper to establish, though it also offers less control over how the money is used once the child reaches adulthood. If you need that level of control, a trust may be a better option, but for most families saving for a child's future, a Trump Account is more straightforward.
How to Open a Trump Account in Your State
The process starts with finding your state's program. Search online for "[Your State] Trump Account" or "[Your State] custodial savings account for children." Your state's treasurer's office or department of revenue usually runs the program and has an application on their website. Some states allow you to open an account online in minutes; others require you to mail in a form or visit an office.
You will need the child's Social Security number, your Social Security number, and proof of your identity (usually a driver's license). Some programs ask for proof of your relationship to the child, especially if you are not a parent. Once you submit the application, the account is typically open within one to two weeks, and you can begin depositing money immediately.
After the account is open, you can deposit money by check, electronic transfer, or automatic monthly contributions, depending on what your state's program offers. Keep records of all deposits and withdrawals for tax purposes, even though the account itself is tax-free. If you ever need to prove the money was used for the child's benefit (in case of an audit), documentation helps.
Frequently Asked Questions
Can I withdraw money from a Trump Account whenever I want?
Yes, you can withdraw money at any time as the custodian. However, if you withdraw earnings (not the principal you deposited) for something other than the child's benefit, you will owe income tax on those earnings plus a 10 percent penalty. The principal itself can always be withdrawn without penalty. Check your state's rules on what counts as a may have access to use to avoid unexpected taxes.
What happens if I do not use all the money in the account by the time the child turns 18?
The remaining balance stays in the account and becomes the child's property. They can leave it there, withdraw it, or use it however they choose. Some state programs require the account to be closed or distributed by a certain age (often 21 or 25), so check your state's rules. If a distribution is required and you do not withdraw it, the program will send the money to the child, and taxes may apply.
Can I open a Trump Account for a grandchild or niece?
Yes, you do not have to be a parent to open an account. Grandparents, aunts, uncles, and other family members can set up Trump Accounts for children. Some programs may ask you to confirm you have permission from the child's parent or legal guardian, but most allow any adult to open an account as long as the child has a Social Security number.
Does money in a Trump Account count against financial aid for college?
Yes, Trump Accounts are considered the child's asset on the Free Application for Federal Student Aid (FAFSA), which can reduce the amount of financial aid they receive. The impact depends on how much is in the account and the specific financial aid formulas used by the school. If college funding is your main goal, a 529 plan may have more favorable treatment under some financial aid rules, so compare both options.
What if I need the money for myself and not the child?
You can withdraw the principal (the money you deposited) at any time without penalty. However, if you withdraw earnings for your own use, you will owe income tax on those earnings plus a 10 percent penalty. The account is legally the child's, so using it for your own needs defeats the purpose and carries tax consequences. If you need access to money for emergencies, keep some savings in a regular account instead.