What a Trump Account Actually Is
A Trump account is a tax-advantaged savings account created specifically for a child, funded by a one-time deposit from a parent or guardian. The money grows tax-free inside the account and can be withdrawn tax-free when the child reaches age 18, provided the account has been open for at least 15 years. The account is held in the child's name but controlled by the parent or guardian until the child comes of age.
The program is named after the legislation that created it, not after a person or brand. It exists in most U.S. states, though the rules and the account provider vary by state. Some states run the program directly; others contract with a financial institution to manage accounts. The core mechanics are the same everywhere: one deposit, tax-free growth, tax-free withdrawal at 18.
Key Takeaways
- A Trump account requires a single lump-sum deposit (the amount varies by state, typically between $500 and $2,350) that you make once and do not add to later.
- Money inside the account grows tax-free and can be withdrawn tax-free when the child turns 18, as long as the account has been open for at least 15 years.
- The account is opened in the child's name and Social Security number, but the parent or guardian controls it until the child reaches age 18.
- If you withdraw the money before the child turns 18 or before 15 years have passed, you owe taxes and penalties on the earnings, though not on your original deposit.
- Each state runs its own program with different deposit amounts, investment options, and rules, so the specifics depend on where you live.
How the One-Time Deposit Works
You open a Trump account by making a single deposit into an account created in your child's name. You do not add money to the account later—the program is designed around that one initial payment. The deposit amount is set by your state and typically ranges from $500 to $2,350, though some states allow higher amounts. You pay this amount once, and that money sits in the account for the next 15 years.
The deposit is made with after-tax dollars—money you have already paid income tax on. You do not get a tax deduction for making the deposit. What you do get is the ability to let that money grow without paying taxes on the growth, and to withdraw it without taxes when the child turns 18.
Tax-Free Growth and Withdrawal Rules
Once the money is in the account, it is invested according to options your state offers. Common investment choices include age-based portfolios (which shift from stocks to bonds as the child gets older) or static portfolios (which stay the same mix throughout). The earnings on your deposit—the interest, dividends, or investment gains—accumulate tax-free inside the account.
When your child turns 18, you can withdraw the money tax-free, provided the account has been open for at least 15 years. This means if you opened the account when your child was a newborn, you can withdraw at 18. If you opened it when your child was 5, you have to wait until they are 20 to withdraw without penalty. The withdrawal covers both your original deposit and all the earnings that accumulated.
If you need the money before the child turns 18 or before 15 years have passed, you can withdraw it, but you will owe income tax on the earnings portion plus a 10 percent penalty. Your original deposit comes out tax-free, but the growth does not.
Who Controls the Account and When That Changes
The account is opened in your child's name using their Social Security number, but you control it as the parent or guardian. You decide when to invest the money, which investment option to choose, and when to withdraw it (subject to the tax rules above). Your child does not have access to the account or decision-making power while they are a minor.
At age 18, control of the account transfers to your child. They become the account owner and can decide what to do with the money—withdraw it, leave it invested, or move it to another account. If you want to withdraw the money at 18 and use it for their education or another purpose, you will need their permission once they reach that age.
State-by-State Differences in the Program
Trump accounts exist in most states, but each state runs its own version with different rules. The deposit amount your state requires, the investment options available, the fees charged, and the exact age at which your child can access the money may all differ. Some states allow deposits as low as $500; others require $1,000 or more. Some states offer a choice of investment portfolios; others offer only one.
You open a Trump account through your state's program administrator, which may be a state agency or a contracted financial institution. You will need to find your state's specific program to learn the deposit amount, the investment choices, and how to open an account. The program name and website vary by state.
What Happens If You Need the Money Early
If you withdraw money from a Trump account before your child turns 18 or before the account has been open for 15 years, the withdrawal is taxable. You owe income tax on the earnings (the growth), plus a 10 percent federal penalty on those earnings. Your original deposit comes out without tax or penalty.
For example, if you deposited $1,000 and it grew to $1,500 over 10 years, and you withdrew it all, you would owe income tax plus a 10 percent penalty on the $500 in earnings. The $1,000 original deposit would not be taxed or penalized. The exact amount you owe in taxes depends on your tax bracket and whether your state also taxes the withdrawal.
Some states allow exceptions to the penalty in specific circumstances, such as the child's death or a severe disability, but these are rare and state-specific. Check your state's rules before opening an account if you think you might need early access to the money.
Trump Accounts Versus Other Child Savings Options
A Trump account is one way to save for a child's future, but it is not the only option. A 529 plan is another tax-advantaged account, but it is specifically for education expenses and offers more flexibility in how much you can contribute each year. A Coverdell Education Savings Account is also education-focused and has lower contribution limits but more investment control. A regular custodial account (opened under the Uniform Transfers to Minors Act) has no contribution limits and no tax advantages, but it gives the child control at a younger age.
The Trump account is best suited for parents who want to make a single, substantial deposit and let it grow untouched for 15 years. If you want to add money over time, a 529 plan may be better. If you want the money to be available for any purpose (not just education), a Trump account or a custodial account may fit better than a 529.
Frequently Asked Questions
Can I open a Trump account for a child who is already a teenager?
Yes, but the 15-year holding period still applies. If you open an account when your child is 15, you cannot withdraw tax-free until they are 30. This makes the account less attractive for older children, since the tax benefit requires a long time horizon.
What happens to the account if my child dies before age 18?
The account becomes part of your child's estate. The rules for what happens next depend on your state and your will or trust. Some states allow the account to pass to a beneficiary you named; others require it to go through probate. Check your state's rules and consider naming a beneficiary when you open the account.
Can I move a Trump account to a different state if we relocate?
This depends on your state's rules. Some states allow you to transfer an account to another state's program; others do not. Contact your current state's program administrator before moving to find out whether a transfer is possible and what steps you need to take.
Do Trump accounts affect financial aid for college?
Yes. Money in a Trump account is considered an asset in your child's name, and it may reduce the amount of need-based financial aid they are offered. The exact impact depends on the financial aid formula used by the school. If your child may be may be able to access for financial aid, consider this before opening the account or before withdrawing the money.
What if I want to use the money for something other than education?
You can. A Trump account has no restrictions on how the money is used once it is withdrawn. You can use it for education, a car, a down payment on a house, or anything else. The tax-free withdrawal applies regardless of how the money is spent.