Trump savings accounts

[scripta]

To summarize:

@bh wiki

Whether to contribute additional money depends on your personal situation. Tax-advantaged accounts such as 529 plans, Roth IRAs (for minor children with earned income), and custodial accounts can offer more flexibility or better tax treatment. A Cato Institute analysis[20] shows that a $5,000 individual contribution to a custodial account yields an additional $2,451 in after-tax value, when compared to the same individual contribution to a Trump account.

It seems like there are a few reasons to contribute beyond the government & non-profit seed:

• If your employer makes or allows you to make pre-tax contributions.
• To transfer your money to the child and effectively “hide” it from FAFSA, since the child’s IRA is currently excluded, assuming the same exclusion is extended to the Trump Account (credit to glitch99).
• If you are certain that your child will be able to save on taxes with Roth conversions.

Under any other circumstances it seems like a custodial account is better.

I am slightly confused about this quote from the BH wiki:

@bh wiki

Further, the Kiddie tax causes distributions from an account to be taxed at the parent’s marginal rate until the end of the year in which the child turns 23. This eliminates the benefit of the child’s lower tax rate during those years.

Wouldn’t the first $2700/yr (+ inflation adjusted) be tax free for ages 18-23? Is it not mentioned because it’s such a small amount or am I misunderstanding how kiddie tax works?