Guide
530A account or custodial account: what is the difference?
Last checked October 8, 2026
The short answer
Both belong to the child. A custodial account, set up under a state’s Uniform Transfers to Minors Act (UTMA) or the older Uniform Gifts to Minors Act (UGMA), can be spent for the child’s benefit at any time, and the child takes it over at the age their state sets.1 A 530A account cannot be touched before the year the child turns 18, and is not taxed until money comes out.2
Side by side
| Question | 530A account | Custodial account |
|---|---|---|
| Who owns it? | The child. The account is in the child’s name.3 | The child. A gift to the account cannot be taken back.1 |
| Who manages it? | A parent or guardian, as custodian.3 | An adult custodian.1 |
| When does the child take over? | At 18.3 | At the age of majority set by state law.1 |
| Can it be spent during childhood? | No.2 | Yes. The custodian may spend it for the child’s use and benefit.1 |
| How is it taxed? | Not year by year. When money comes out, everything except already-taxed contributions is ordinary income.2,4 | The child’s investment income is taxable as it is earned. In 2026, unearned income above $2,700 falls under the “kiddie tax” rules.5,6 |
| Yearly limit | $5,000 for 2026 and 2027.2 | No set limit. Gifts above $19,000 to one person in 2026 are above the gift-tax exclusion.6 |
| What can it hold? | During childhood, only low-cost funds that track a broad US stock index.2 | Money or other property.1 |
| College financial aid forms | We found no official statement. The federal aid handbook does not mention these accounts.7 | Counted as the student’s asset.7 |
Two things a 530A account can receive
Eligible children get a one-time $1,000 from Treasury.8 An employer can also contribute up to $2,500 a year without it being taxed as the employee’s pay.9 See the $1,000 federal deposit and employer contributions.
After 18
A 530A account becomes subject to traditional IRA rules, so a withdrawal before age 59½ can carry a 10% additional tax unless an exception applies.4 See how withdrawals are taxed.
What this page does not cover
Custodial accounts are governed by state law, and the age of handover differs by state. This comparison describes the rules. It is not a recommendation of either account.
Sources
- Social Security Administration, POMS SI 01120.205, Uniform Transfers to Minors Act
- 26 U.S.C. § 530A, Trump accounts (Cornell Legal Information Institute)
- Treasury’s Trump Accounts website, questions and answers (read October 8, 2026)
- IRS Notice 2025-68, in Internal Revenue Bulletin 2025-52 (December 2025)
- IRS Tax Topic 553, Tax on a child’s investment and other unearned income (reviewed September 24, 2026)
- IRS Revenue Procedure 2025-32, inflation adjustments for 2026 (Internal Revenue Bulletin 2025-45)
- Federal Student Aid Handbook 2026–27, Application and Verification Guide, chapter 2
- 26 U.S.C. § 6434, the $1,000 pilot program (Cornell Legal Information Institute)
- 26 U.S.C. § 128, employer contributions to Trump accounts (Cornell Legal Information Institute)
Last checked October 8, 2026. The rules for these accounts are still being written, so check the sources before acting.