Home / Kids & College / Trump Account vs Custodial Account
Trump Account vs Custodial Account (UTMA/UGMA): Which Is Better?
How the new Trump Account compares with a regular custodial investment account for your child: limits, taxes, flexibility and financial aid.
The short answer
Keep the Trump Account for any free money, and use a custodial account for savings you want to stay flexible. A Trump Account has free money (the $1,000 seed or the Dell $250), no tax while it grows, and very low fees, but it's capped at $5,000 a year and locked until 18. A UTMA or UGMA custodial account has no limit and can hold any investment. The money can be spent on the child at any time, and long-term gains are taxed at lower capital gains rates, but some income is taxed every year under the "kiddie tax."
Side-by-side
| Feature | Trump Account | Custodial account (UTMA/UGMA) |
|---|---|---|
| Free money | $1,000 seed (born 2025–2028, must be elected); Dell $250 for many born 2016–2024; up to $2,500/yr from employers | None |
| Yearly limit | $5,000 from family and employers combined | No limit (gifts over $19,000 per giver in 2026 need a gift tax return) |
| Investments | US stock index funds with fees of 0.1% or less, until the year the child turns 18 | Almost anything: stocks, funds, bonds, cash |
| Tax while growing | None | Kiddie tax: in 2026 the first $1,350 of investment income is tax-free, the next $1,350 is taxed at the child's rate, and more is taxed at the parents' rate |
| Tax when withdrawn | Growth and free money taxed as ordinary income | Long-term gains taxed at capital gains rates (often 0% for a young adult) |
| Access | Locked until the year the child turns 18; then IRA rules, with a 10% penalty before 59½ unless an exception applies | Can be spent for the child's benefit any time |
| Who controls it | Parent who claims it, until 18; then the child | Custodian until 18 or 21 (depending on the state); then the child |
| Financial aid (FAFSA) | Not yet settled: some experts expect retirement-account treatment, others student-asset treatment | Counted as the student's asset, assessed at up to 20% |
When a Trump Account wins
- There's free money. The $1,000 seed, the Dell $250 and employer contributions only go into a Trump Account.
- The money is for the long term. At 18 it becomes a traditional IRA, so it can keep growing tax-deferred for decades.
- You want no yearly tax paperwork. Nothing is taxed until money comes out.
When a custodial account wins
- You want to save more than $5,000 a year.
- You may need the money before 18, for example for a car, school costs or activities.
- You want lower tax on the growth. Long-term gains in a UTMA can be taxed at 0% to 20%, while Trump Account growth is taxed as ordinary income, up to 37%.
- You want to choose the investments, including international or bond funds.
Can you have both?
Yes, and many families do. A common split: collect the free money in the Trump Account, put college savings in a 529, and use a custodial account for flexible savings beyond that. If college is the main goal, check the Trump Account vs 529 calculator first, because a 529 is often the best of the three for education.
Questions parents ask
Is a Trump Account a custodial account?
Partly. An adult manages it for the child, like a custodial account, but it's a type of traditional IRA with a $5,000 yearly cap, restricted investments and no withdrawals before 18.
Does the kiddie tax apply to a Trump Account?
Not while the money stays in the account, because growth is tax-deferred. Tax applies when money is withdrawn after 18.
Can I move UTMA money into a Trump Account?
Only by selling the investments and contributing cash, within the $5,000 yearly limit. Selling can create taxable gains for the child.
Which is better for financial aid?
A UTMA definitely counts as a student asset. How Trump Accounts will be treated hasn't been settled by the Department of Education, so don't rely on either answer yet.
Last checked November 11, 2026. Tax figures are for 2026.