Exit strategies – what if you change your mind?

Previously in this series, Articles 1–5 covered filing urgency, account mechanics, tax treatment, age 18 transitions, and comparisons with 529 plans.

Now we turn to flexibility. What happens if your plans change? Understanding your exit options is essential before making long-term commitments.

The reality of buyer's remorse

Opening a Trump Account might seem like an easy decision when you're claiming $1,000 of free government money. But life changes. Financial emergencies arise. Priorities shift. What if you open a Trump Account and later regret it?

This article addresses the uncomfortable questions:

• Can you close a Trump Account if you change your mind?
• What happens if you need the money urgently?
• Can you convert it to another type of account?
• What are your options before vs. after the child turns 18?
• What happens if the child dies?

Understanding your exit options is crucial before committing to an account that locks up funds for up to 18 years.

The hard truth: Limited exit options before age 18

The Golden Rule of Trump Accounts

Withdrawals are NOT PERMITTED before January 1 of the year the child turns 18.

This restriction is absolute and applies regardless of:

• Financial emergencies
• Medical crises
• Job loss
• Change of heart about the account
• Wanting to use money for other purposes

There are only THREE exceptions to this rule:

Exception 1: Death of the child (only permitted withdrawal)

What happens

If the child dies before age 18, the Trump Account can be distributed to:

• Named beneficiaries on the account
• The child's estate (if no beneficiaries named)

Who can be named as the beneficiary?

When opening the Trump Account, the responsible party should designate beneficiaries.

Primary beneficiary options:

• Parents (individually or jointly)
• Siblings
• Grandparents
• A trust for the child's estate
• Charity

NOTE! Beneficiary designations on the Trump Account override any provisions in a will or trust. This is critical for estate planning.

Best practice: Name specific beneficiaries when opening the account to avoid the account passing through probate.

Exception 2: Qualified rollover to another Trump Account

What this means

You can transfer the entire Trump Account from one financial institution to another.

This is NOT an exit strategy – it's just moving the account:

• Money stays locked until age 18
• All restrictions remain
• No access to funds
• Same investment rules apply

This does NOT help if you need money.

Exception 3: ABLE account rollover (disability only)

What this is

ABLE Accounts are tax-advantaged savings accounts for people with disabilities that began before age 26.

Timing: Can roll the Trump Account to the ABLE account only during the calendar year the child turns 17.

Limitations

• Only available in the specific year the child turns 17
• Subject to ABLE annual contribution limits
• Cannot do it earlier or later
• Once rolled to ABLE, cannot roll back to the Trump Account

This helps only families with disabled children, and only at age 17.

What you CANNOT do before age 18

Cannot close the account

There is no provision for simply closing a Trump Account and receiving the money back.

• You cannot withdraw for your college tuition at age 16
• You cannot withdraw for emergency medical expenses at age 12
• You cannot withdraw because you lost your job
• You cannot withdraw because you decided it was a mistake

The account exists, locked, until January 1 of the year the child turns 18.

Cannot reverse contributions

While you cannot be forced to contribute (contributions are voluntary), you also:

• Cannot remove contributions you've already made
• Cannot reverse employer contributions
• Cannot get the government's $1,000 back

Once money goes in, it's stuck.

Cannot change the Beneficiary

Unlike 529 plans, where you can change beneficiaries:

• Trump Accounts are permanently the child's property
• Cannot transfer to a sibling
• Cannot transfer to yourself
• Cannot change who owns it

The child owns this account from day one.

Cannot convert to another account type

Before age 18, you cannot convert a Trump Account into:

• A 529 plan
• A UGMA/UTMA custodial account
• A regular IRA
• A brokerage account
• A trust

It remains a Trump Account until age 18.

What if you have an urgent financial need?

The uncomfortable reality

If you open a Trump Account and contribute $5,000/year for several years, then face a financial emergency, that money is completely inaccessible.

The Trump Account cannot help you in an emergency.

Exit options after age 18

Once the child turns 18, numerous exit strategies become available:

Exit strategy 1: Full cash-out (the nuclear option)

How it works

Child withdraws the entire Trump Account balance immediately.

Tax consequences

This is the most expensive exit strategy:

Example:

• Trump Account worth $200,000 at age 18
• Tax basis: $90,000 (after-tax parental contributions)
• Taxable amount: $110,000

You just lost $40,700 (20.4%) to taxes.

When this might make sense

Rarely advisable, but consider if:

• Child has a massive debt that's destroying their credit (extremely high-interest)
• Life-or-death medical emergency not covered by insurance
• Fleeing domestic violence and need immediate funds for safety
• Extraordinary once-in-a-lifetime opportunity with documented ROI exceeding tax cost

Better alternatives exist in 99% of scenarios.

Exit strategy 2: Gradual withdrawals (penalty minimization)

How it works

Withdraw only what's needed for qualified expenses (avoid 10% penalty):

• College tuition and expenses
• First-time home purchase (up to $10,000)
• Medical expenses above 7.5% of AGI
• Birth/adoption expenses

Tax consequences

Still taxable, but no penalty:

Example:

• $60,000 withdrawal for 4 years of college ($15,000/year)
• All withdrawals penalty-free (education exception)
• Taxed at student's rate (likely 10–12% during college)
• Total taxes: $6,000–$8,000
• Much better than an $11,000 penalty + higher taxes

When this makes sense

• Child actually needs money for qualified purposes
• Want to minimize tax damage
• No other funding sources available (though 529 is better for education)

This is a "making the best of it" strategy, not optimal.

Exit strategy 3: Roth Conversion (the smart exit)

How it works

Convert the Trump Account to a Roth IRA over several years while the child is in low tax brackets.

This is not really an "exit"; it's a transformation into a superior account.

Exit strategy 4: Rollover to a traditional IRA

How it works

At age 18, roll the Trump Account into a traditional IRA at any financial institution.

This removes the "Trump Account" designation but keeps all IRA restrictions.

When this makes sense

If the child wants:

• To consolidate accounts (merge the Trump Account with other IRAs they open later)
• More investment options (no longer restricted to US stock indexes)
• To treat it as one big IRA for simpler management

Tax consequences

• Rollover itself is tax-free
• All basis tracking carries over
• Future withdrawals are still taxable
• Still subject to 10% penalty before 59½ (unless exceptions)
• Still subject to RMDs after age 73

This is just relabeling, not a true exit strategy.

Exit strategy 5: Transfer to trust (estate planning)

The question

Can a Trump Account be transferred into a trust?

The answer: yes, indirectly

You cannot directly transfer a Trump Account into a trust before age 18.

After age 18, the adult child can:

• Name a trust as beneficiary of the Trump Account (in case of the child's death)
• Withdraw funds (paying taxes) and then contribute to a trust
• Leave funds in the Trump Account and use a trust for other assets

Using a trust as a beneficiary

The most common approach.

Setup:

• The child (now 18+) updates the beneficiary designation
• Names a trust (revocable or irrevocable) as beneficiary
• If the child dies, the Trump Account passes to the trust

Benefits:

• Control distribution to ultimate heirs
• Protect assets from creditors
• Manage distribution timing (especially if trust beneficiaries are minors)
• Reduce estate taxes (with proper trust structure)

Withdrawing and funding a trust

Less common, but possible.

Can you transfer a Trump Account to a parent or grandparent?

Before age 18: Absolutely not

The child owns the account from the moment it's created.

• Parents control investment decisions, but do NOT own it
• Cannot transfer to yourself
• Cannot "take back" contributions
• Cannot claim ownership

After age 18: Only through withdrawal (with massive tax costs)

The now-adult child could:

• Withdraw money from Trump Account (pay taxes + penalty)
• Gift remaining funds to parent/grandparent
• Parent/grandparent pays gift tax if over $19,000/year

Key takeaways

1. NO EXITS before age 18 except death, ABLE rollover, or moving to a different institution
2. You cannot close the account if you change your mind
3. Cannot access funds for emergencies – money is completely locked
4. Child gains full control at 18 – the parent cannot prevent withdrawals
5. Roth conversion at 18–25 is optimal "exit” – transforms locked money into tax-free wealth
6. Only contribute money you won't need for 18+ years
7. Claim the $1,000 government seed even if contributing nothing else
8. Beneficiary designations trump wills/trusts – crucial for estate planning
9. This is a feature, not a flaw – the lock-up forces long-term wealth building
10. Think carefully before contributing beyond the match/seed – flexibility matters

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