2/2026

We want to share a brief overview of the newly created Trump Accounts, a federally established investment account designed to encourage long-term saving for children. Guidance on these accounts is still evolving, and the information below reflects our current understanding based on available IRS and Treasury guidance.

As always, we’re happy to discuss how (or if) these accounts might fit into your overall financial plan.

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What Are Trump Accounts?

• Federally created accounts structured similarly to traditional IRAs, designated for children
• Owned by the child and held under custodial control until age 18
• Initially created and administered by the U.S. Treasury
• Designed to encourage early investing using a retirement-account framework
• Accounts become available beginning July 5, 2026

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Who Is Eligible?

• Children under age 18 with a Social Security number
• One Trump Account permitted per child
• U.S. citizens born 1/1/2025 – 12/31/2028 may receive a one-time $1,000 federal seed contribution
• Children outside the seed window remain eligible, but do NOT receive the seed contribution

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Potential Advantages

• No earned income requirement for individual contributions
• Tax-deferred growth with no annual taxation of dividends or gains
• Flexible funding sources, including individuals, employers, and charities

Limitations to Consider

• Investment choices are limited to low-cost U.S. equity index funds
• No active management, customization, or international diversification
• Withdrawals before age 18 are generally prohibited
• Distributions are generally taxed as ordinary income, similar to a traditional IRA
• Pre-tax contributions (such as employer contributions or salary deferrals) may trigger the kiddie tax at the parent’s marginal rate
• Traditional IRA rules apply after age 18, including required minimum distributions (RMDs)
• No income tax deduction or credit for individual contributors

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Contribution Rules

• Contributions cannot be made before July 4, 2026
• $5,000 annual contribution limit per child, per year
• The $1,000 federal seed contribution:
  • Applies only to children born 1/1/2025–12/31/2028
  • Does not count toward the $5,000 annual limit
  • Is a one-time contribution
• The first 25 million children born before 2025 (but younger than 10) may qualify for a $250 Dell Family contribution, subject to household income limits (zip codes with median income under $150,000)
• Contributions made by individuals (after-tax) are generally not taxed again upon distribution. Earnings and employer/government contributions are taxed as ordinary income.
• Employer contributions count towards the limit and are not taxable as income to the employee.
• Government seed contributions and qualified charitable contributions:
  • Do not count toward the annual limit
  • Are taxable when withdrawn
• Contributing to a Trump Account does not reduce eligibility to contribute to other IRAs if the child has earned income
• Contribution limits will be indexed for inflation after 2027

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Withdrawal Rules

• Withdrawals are generally not permitted before age 18
• After age 18, the account is subject to most traditional IRA contribution and withdrawal rules
• If kept separate after age 18, Trump Accounts may be excluded from aggregation with other IRAs when calculating RMDs and related taxes

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Gift Tax Treatment

• Individual contributions are treated as completed gifts to the child
• Fully funding a Trump Account for a single year does not exceed the annual gift exclusion but does count toward the $19,000 limit for 2026

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Investment Allocation Rules

• Investments are limited to mutual funds or ETFs that:
  • Track the S&P 500 or another equity index with regulated futures contracts
  • Invest at least 90% in U.S. companies
• No leverage is permitted
• Expense ratio capped at 0.10% or less
• Trustees may offer multiple investment options and must designate a default investment

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How to Register

• Accounts must be established by a parent or legal guardian
• Requires an IRS election (expected via Form 4547) when filing taxes, or through a Treasury portal available Summer 2026
• Elections open mid-2026; accounts available July 5, 2026
• Treasury will create the initial account, with rollovers to approved financial institutions expected (including Fidelity and Schwab)

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Planning Considerations

• After age 18, accounts may:
  • Remain Trump Accounts
  • Roll into a traditional IRA or eligible retirement plan
  • Be converted to a Roth IRA if appropriate
• Traditional IRA rules apply after age 18, including RMDs
• Kiddie tax may apply to taxable withdrawals funded with pre-tax dollars

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Additional Notes

• IRS and Treasury guidance is still evolving, particularly around employer plan adoption, rollovers, tax treatment, and RMD requirements
• Trump Accounts are best viewed as supplemental and should not replace 529 plans, Roth IRAs, or UTMAs
• Based on current information, Trump Accounts do not appear suitable for direct management on our platform, though we can monitor them by reviewing account statements as part of ongoing planning discussions

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Helpful Resources

• https://www.fidelity.com/learning-center/personal-finance/trump-accounts
• https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/what-to-know-about-new-trump-accounts-for-kids.html
• https://www.grantthornton.com/insights/newsletters/tax/2025/hot-topics/dec-09/irs-issues-initial-guidance-on-trump-accounts

If you have questions or would like to discuss further, please don’t hesitate to reach out to your Cahaba Wealth advisor.

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.