Saving for your child or grandchild is an important decision. The type of account you use can have a huge impact on the end result. If you are considering saving for your child/grandchild, please reach out to our office and we can help determine the best account for your situation!
If you already have savings started and are wondering if it is right for them, call or text us at 608-782-1642 and we will do a free analysis of your current plan.
This is a comparison of 3 options for your child or grandchild for the future.
Account Feature | TRUMP Account | 529 Plan | UTMA Account |
|---|---|---|---|
Primary Purpose | Long-term wealth building for children | Education savings | Flexible savings/investing for a minor |
Who Owns the Account? | Child (No access prior to age 18) | Adult account owner controls assets for beneficiary | Custodian manages assets for the minor |
Beneficiary | Child | Named beneficiary (usually a child) | Minor child |
Tax Treatment of Growth | At Age 18 becomes Traditional IRA (subject to taxation and penalties if withdrawn) | Tax-free growth if used for qualified education expenses or converted to Roth | Investment income may be subject to the "kiddie tax" rules |
Contribution Limits | $5,000 per year | High lifetime limits (vary by state, often $235k–$600k+) | No annual account limit, though gift tax rules apply |
Government Contribution | $250-$1,000 (subject to child’s age and potential income brackets) | None | None |
Investment Options | Limited menu of investments | Mutual funds, age-based portfolios, etc. | Broad range of investments (stocks, ETFs, bonds, mutual funds) |
Permitted Uses | Potentially broad uses after reaching age 18 (Taxation and penalties may apply) | Qualified education expenses; Able to convert to Roth IRA Tax-Free | Any purpose that benefits the child |
Education Use | Possible but not exclusive | Primary focus | Allowed |
Home Purchase Use | May be allowed under program rules | Generally not a qualified expense | Allowed if for the child's benefit; unrestricted after transfer |
Transfer of Ownership | Child gains control at age 18 | Account owner retains control indefinitely | Child automatically gains control at age of majority (18–25 depending on state) |
Financial Aid Impact | Rules depend on final program design | Generally favorable when parent-owned | Often less favorable because assets belong to the child |
Potential Tax Benefits | Government seed funding | Potential State Tax Deductions for contributions. Strong tax benefits for education savings or Roth conversion | Limited tax advantages |
SOURCES:
trumpaccounts.gov
529wi.voya.com
capitalgroup.com/advisor/account-resource-center/ugma-utma.html