Your Annual Gifting Strategy: Comparing Crummey Trusts, UTMAs, 529s, and Trump Accounts

Laying a strong foundation for loved ones’ futures requires comprehensive and forward-thinking planning. There are a number of vehicles—including Crummey Trusts, UTMAs, 529 Plans, and now Trump Accounts—that can contribute to a family’s overall giving strategy, each with distinct purposes and characteristics that could have short- and long-term impact.

What is a Trump Account?

At its core, a Trump Account (TA) is a retirement savings vehicle for children.

A TA allows loved ones to support a child’s future by making financial contributions that will be invested and can compound over time. Funds cannot be accessed during this “growth period” by contributors or the child.

The growth period ends the calendar year the child turns 18, and the TA becomes subject to most traditional individual retirement account (IRA) rules (e.g., early withdrawal penalties and taxation rules). The child becomes the owner of the account and has full control over the funds within. They may choose to convert the TA to a traditional IRA at this time.

Source: https://investamerica.org/

This is an illustrative example, not indicative of typical outcomes or strategies, and should not be interpreted as an endorsement of a strategy or product by Goldman Sachs. 

How Do Trump Accounts Compare to Common Gifting Vehicles?

While this article compares Trump Accounts, Crummey Trusts, UTMAs, and 529 plans, this is not an exhaustive list of options.² Discuss specifics of each vehicle and how they could align with or impact plans you have in place with your wealth advisor.
 

Basic vehicle structure

• Trump Account: A new tax-advantaged retirement savings account for children.
• Crummey Trust: A type of irrevocable trust that allows the beneficiary to withdraw a gift within a certain amount of time of it being made (e.g., 30–60 days). Assets not withdrawn remain in the trust, to be distributed to beneficiaries according to the terms of the trust agreement.
• Uniform Transfer to Minors Act (UTMA) account: A custodial account holding assets legally owned by the minor but managed by a custodian—usually a parent—until the minor reaches the “age of majority” as defined by the state (i.e., 18, 21, or 25).
• 529 Plan: A tax-advantaged savings account used for qualified education expenses.

What is your primary objective for the gift?

As you consider which vehicles to include in your gifting strategy, think about the individuals you are providing for and your priorities for them. Specific-purpose vehicles will have limited applicability, but could provide unique benefits if they align with your goals for your loved ones.  

• Trump Account: Long-term retirement savings
• Crummey Trust: No vehicle-specific purpose—this can be determined in the trust agreement
• UTMA: No vehicle-specific purpose but UTMAs offer relatively easy establishment and administration compared to other vehicles
• 529 Plan: Education expenses

Who can control how the funds are invested?

The amount of control needed can depend on personal preferences and circumstances. In cases where a vehicle provides less control over the investments within, some families elect to establish another vehicle that balances out the risks associated, gaining a level of control. 

• Trump Account: TAs have specific rules around “eligible investments” (e.g., invested in a standard US stock market index fund like the S&P 500). The individual who establishes the account (the “authorized individual”) will be able to select among eligible investments.  
• Crummey Trust: The trustee or trust investment advisor invests any contributions per the terms of the trust document.
• UTMA: A custodian manages the account on behalf of the minor until they reach the age of majority, including investments.
• 529 Plan: While rules may vary by state, most plans have professional investment managers who invest according to the account owner’s preselected investment option. 

Who can control the distributions and to what extent?

When providing for loved ones, especially those who are younger, some families may prefer to have more control over what happens to the funds when it comes to distributions.

• Trump Account: No distributions are permitted until the calendar year the child turns 18.³  At this time, distributions would become subject to most traditional IRA rules, including early withdrawal penalties for distributions made before age 59 ½.⁴
• Crummey Trust: The beneficiary/beneficiaries has/have a specific window (typically 30 to 60 days) after a gift is deposited to withdraw the funds. If the funds are not withdrawn, they will be distributed according to the trust agreement.
• UTMA: The custodian has control until the beneficiary reaches the age of majority—then the beneficiary has control.
• 529 Plan: Distributions can be made at any time, with those for qualified education expenses being income tax-free. Non-qualified distributions will be taxed on earnings and will be subject to the 10% early withdrawal penalty.  

Is there flexibility in case of changed circumstances?

The extent of your ability to make changes, including regaining funds post-transfer or changing a beneficiary, could greatly impact which vehicles you may be comfortable with.

• Trump Account: There is little flexibility, as distributions are severely limited during the growth period. The account may be transferred, but only into another Trump Account for the same individual.
• Crummey Trust: Gifts are irrevocable and beneficiaries cannot be changed without legal action.
• UTMA: Funds transferred are irrevocable and become immediate property of the beneficiary at the time they reach the age of majority. The account cannot be transferred to another individual.
• 529 Plan: The account owner may change the designated beneficiary to another member of the current beneficiary’s family (e.g., spouse, child, or sibling).

What are income, gift, estate, and GST tax considerations?

Taxes can be a major consideration when determining the preferred approach to an annual gifting strategy. Decisions made here could impact your broader wealth planning and should be carefully considered with your tax and legal professionals. 

• Trump Account: Funds grow tax-deferred in a TA, with distributions post-growth period taxed according to traditional IRA rules. The IRS released a safe harbor rule for gifts to a Trump Account if certain conditions are met, eliminating the gift tax return filing requirement. Consult a tax professional for more information on gift tax implications.
• Crummey Trust: Income is taxed according to the trust agreement (i.e., whether it is created as a grantor or non-grantor trust). Depending on the beneficiaries, contributions could be covered under the GST annual exclusion.
• UTMA: The minor is the taxpayer when it comes to income tax—often subject to the “kiddie tax”, which effectively imposes tax at the parent’s rate rather than the child’s.
• 529 Plan: Funds grow tax-deferred and withdrawals are income tax-free if used for qualified education expenses. Some states may offer state tax deductions for contributions.

Determining the best use of your annual gift tax exclusion for each loved one ($19,000 for single filers or $38,000 for married couples¹) and whether these vehicles align with your priorities requires careful consideration with a tax professional.

Trump Account FAQs

• Who is eligible for an account? Children who have a Social Security number (SSN) and will not turn 18 before the end of the calendar year are eligible for a Trump Account.
• Who is eligible for the $1,000 federal contribution? Only US citizens with an SSN born between 1/1/25 and 12/31/28 qualify for the federal contribution.
• How do I open a Trump Account for a loved one? Individuals looking to establish a Trump Account for an eligible child must file IRS Form 4547. The Treasury Department will then review and create the account.
• Who can contribute to a Trump Account? Individuals (e.g., parents, grandparents, relatives, friends), governments (e.g., federal, state, local, tribal), employers, and nonprofit entities can contribute to a TA.
• Are there contribution limits? For individuals, the annual contribution limit is $5,000. For employers, the annual limit is $2,500/employee. For government and nonprofit contributions, there is no limit.

Considerations When Gifting

Each of these vehicles comes with benefits and considerations that should be reviewed carefully with legal, tax, and financial advisors. Your gifting strategy and choices could have a far-reaching impact on your and your giftee’s wealth and estate planning. Work with a wealth advisor to understand the potential impacts related to your situation.