My granddaughter's minor account (a UGMA account made before the OBBB and Trump accounts) has $7,349, up $2,349 from the original $5,000 I put into it 14 months ago shortly after she was born. Up 47% in 14 months. Withdrawals from it will face capital gains taxes.
But the Trump accounts will be taxed like IRAs after the kid turns 18. In other words, all withdrawals will be taxed like normal income. With UGMA accounts (minor accounts like we've had for years) the withdrawals will be taxed at capital gains rate, not normal income tax rate. If it's a large amount, the capital gains rate is better.
The exception would be if the young adult (after 18) isn't working and does withdrawals from the Trump account. Because normal income tax has a high standard deduction, withdrawals from a Trump account would allow for a huge portion to be not taxed until taxes kick in. But if the young adult is working anyway (and making more income to max out the standard deduction) and adds to that withdrawals from the Trump account, then it would be taxed less if it was in a standard UGMA (lower tax rates for long term capital gains). So whether a UGMA account or Trump account is better depends on if the "kid" will be working while taking withdrawals.
Another difference, Trump accounts last I read have limitations on what kind of mutual funds you can invest in. Things like index funds only. UGMA accounts can invest in any mutual fund type (my granddaughter's is split between a S&P 500 index fund and a small-cap value fund). So on investing options, UGMA's win.
One thing that's good about Trump accounts though is free money from the government to start it. As far as free money goes, Trump accounts are better.
**Withdrawals from it will face capital gains taxes.**
Agree-needs to be fixed. I mentioned Roths. That would really fry the left but it’s only fair if money going into the account is after taxes.
**So whether a UGMA account or Trump account is better depends on if the “kid” will be working while taking withdrawals.**
You lost me only because it’s complicated. Confining the money to index funds is simpler because a young worker is in a better position to just go out and make more money. At age 40 or 50 one can follow those investment rules investors subscribe to.
**And I’m going to listen to CBS News tell me “what to know”? About anything?!**
Come on man!
We started with a fifty buck monthly contribution to UTMA for our kids back in the ‘90s. For their educational expenses (tuition, books, etc.).Eighteen years. Then it had to be an UGMA.
Clinton’s Congress changed the rules and it all became taxable at capital gains rates of 20% when you pull it out.
That’s what happens when Congress changes the laws on educational investment accounts.
If they can do that on a whim, there is no stopping them from confiscating our investment accounts. For the good of the people.