Considerations for Gifts to Minors

“Babies don’t keep,” wrote Ruth Hulbert Hamilton, in her poem, Song for a Fifth Child. As Hamilton knew, babies quickly grow up, making today the best time to plan for their success and lay a solid financial foundation for their future.

Many parents and grandparents ask about the best way to save for their children or grandchildren’s future. The right answer depends on your goals. For example, do you want to fund their college education? Or, would you like to get a head start on their retirement savings? Perhaps you desire flexibility for a range of possibilities, such as establishing their emergency fund or providing start-up cash for a business.

Below are four accounts you may consider:

Trump Account:

Introduced in 2025 under the One Big Beautiful Bill Act, Trump Accounts are designed to allow families the opportunity to get a jump start on retirement savings for their child. Key considerations include:

• Parents / Legal Guardians control the funds until the child is 18, at which point the account becomes the child’s.
• Anyone can contribute to the account.
• The annual contribution limit is $5,000, set to begin indexing for inflation in 2028.
• Individual contributions are considered after-tax, while any government or employer contributions are considered pre-tax.
• Earnings growth is tax-deferred.
• Distributions receive similar tax-treatment to IRAs. Withdrawals may be subject to ordinary income taxes, and withdrawals prior to age 59.5 may be subject to penalty taxes unless an exception applies.
• No withdrawals are allowed prior to age 18.

The intent of these accounts is to provide long-term, retirement-focused savings. If you want to lay a solid retirement foundation for your child, this account may be appropriate.

*Bonus Tip: For children born between January 1, 2025, and December 31, 2028, a one-time government contribution of $1,000 may be available.

529 College Savings Plans:

Created by Congress in 1996 as part of the Small Business Job Protection Act, 529 college savings plan accounts, as the name implies, provide families with an opportunity to save for college costs. Key considerations include:

• An account owner controls the funds with a named beneficiary as the intended recipient of the funds. Importantly, the beneficiary has no legal access or control, and the account owner can change the beneficiary at any time.
• Anyone can contribute to the account.
• Contribution limits vary by state, and annual gift tax exclusions apply.
• Contributions are considered after-tax.
• Earnings growth is tax-free.
• Distributions are tax-free when used for qualified education expenses.
• Funds can be accessed at any time.

If you want to ensure that funds apply toward a child’s education, 529 College Savings Plans are commonly used due to their triple-tax advantage.

Uniform Transfers to Minors Act (UTMA) Accounts:

Introduced in 1986 and replacing the older Uniform Gifts to Minors Act (UGMA) accounts, UTMA accounts allow assets to be transferred to a minor with the help of a custodian. Key considerations include:

• A custodian controls the funds until the age of majority for the child, which can vary by state. At age of majority, the account becomes the child’s with full access to the funds.
• Anyone can contribute to the account.
• There are no contribution limits, but annual gift tax exclusions apply.
• Contributions are considered after-tax.
• Earnings growth is taxable and subject to the kiddie tax.
• Distributions are tax-free.
• Funds can be accessed at any time.

While offering a simplified and flexible way to manage funds for the benefit of a child, these accounts are commonly used when the intent is to make an irrevocable gift with full access by the child at age of majority.

Taxable Account:

Perhaps the oldest and most fundamental investment account type, taxable accounts offer maximum flexibility and liquidity suitable for a variety of purposes and goals. Considerations are similar to UTMA accounts, except the account owner retains full control of the assets.

For families seeking a flexible approach to savings, the taxable account may be considered as one option. The owner retains full control of the assets, and they can choose when and how to distribute the assets: for their own benefit, or as gifts to children at a time they choose and for any purpose. For example, you may wish to help seed a business venture for a child or grandchild or provide funds towards a first home purchase. You retain the ability to choose when and how the funds are distributed and used.

John F. Kennedy once said, “Children are the world’s most valuable resource and its best  hope for the future.” Saving today for their future selves through a thoughtful plan opens a door of opportunities and possibilities. If you want to learn more, reach out to a Savant advisor today.

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.