New Trump Accounts: Key Features, Rules & Planning Considerations

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.

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

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

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

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

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

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

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

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)

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

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

Helpful Resources

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.

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