Trump Accounts: What Treasury's Proposed Investment Rules Mean for Parents

Treasury and the IRS have proposed rules on what a Trump account is allowed to hold. The proposal, announced August 20, would limit investments to mutual funds and ETFs that track an equity index of primarily U.S. companies, such as the S&P 500, that use no leverage and charge no more than 0.1% a year in fees and expenses, per the IRS. Public comments are due October 20, which is tomorrow. These are proposed regulations, not final ones, so details could change.

A quick refresher on Trump accounts

A Trump account is a tax-advantaged account for a child under 18 with a Social Security number. Parents or authorized individuals open one using IRS Form 4547. The program comes from the 2025 tax law, and the first IRS guidance, Notice 2025-68, set the basic rules. According to EY's summary of that notice:

• Contributions could begin July 4, 2026.
• The annual limit is $5,000 for 2026 and 2027, adjusted for inflation after that. Employer contributions count toward the limit, and an employer can put in up to $2,500 per employee, not per child.
• Treasury's $1,000 pilot deposit, for eligible U.S.-citizen children with a Social Security number born from 2025 through 2028, does not count toward the $5,000 limit.
• No withdrawals are allowed during the "growth period," which ends before January 1 of the year the child turns 18, with narrow exceptions such as rollovers and death.
• Afterward the account generally follows IRA-style rules. Parent contributions create basis that isn't taxed again on the way out, while earnings, employer money, the federal pilot deposit, and charitable gifts are taxable when withdrawn.

What the proposed rule would do

The new proposal deals with the investments, not the contribution rules. It would apply while the child is in the growth period, which for investment purposes runs from when the account is opened through December 31 of the year the child turns 17. After that, the restrictions would end.

The trustee-fee exclusion comes from the Journal of Accountancy's reading of the proposal, which quotes the rule: the limit on annual fees and expenses "does not apply to trustee fees." That means the account's overall cost can be higher than the fund's. Check what the trustee charges.

Why a 0.1% cap matters

Fees are one of the few things in investing you can see in advance. The cap keeps the fund expense low, and over an 18-year growth period, the gap between a cheap fund and a typical one compounds.

What the rule doesn't change

• The money is locked in. No withdrawals during the growth period means no access for emergencies or a first car. That is the biggest difference from a custodial UTMA account.
• The choices are narrow. Under the proposal, the account would hold index funds of primarily U.S. companies. Bonds and cash wouldn't be options, so the child's balance would largely rise and fall with the stock market.
• Taxes are different from other kids' accounts. A 529 plan allows tax-free withdrawals for qualified education costs, and a custodial Roth IRA requires the child to have earned income. A Trump account has its own rules, with parent deposits generally made from after-tax money.
• The pilot deposit is separate. If your child is eligible for the $1,000 federal deposit, it is claimed through the election on Form 4547, and it doesn't use up any of the $5,000 limit.

What to watch

The comment period closes October 20, and Treasury and the IRS then decide whether to finalize, change, or drop the proposal. The default fund, the list of four additional ETFs, and the fee cap could all shift. If you've opened an account, your trustee will tell you which investments it offers. If you haven't, the proposal gives you a preview of what the choices will look like.

None of this makes a Trump account right or wrong for your family. It's one more place to put money for a child, next to the 529, the custodial account, and, with earned income, a custodial Roth. Which fits depends on your goals, your tax situation, and how you feel about money being unavailable until the child is an adult.

Common questions

Are the Trump account investment rules final?

No. Treasury and the IRS issued them as proposed regulations on August 20, 2026, and comments are due October 20, 2026. The final version could differ.

What can a Trump account invest in under the proposal?

Mutual funds and ETFs that track an equity index of primarily U.S. companies, such as the S&P 500, that don't use leverage and have annual fees and expenses of no more than 0.1% of the fund balance.

What is the default investment?

Treasury has named the State Street SPDR Portfolio S&P 500 ETF (SPYM) as the default. If no eligible investment is chosen, the proposal says the trustee invests in one it selects.

How much can be contributed to a Trump account?

Per EY's summary of IRS Notice 2025-68, the limit is $5,000 a year for 2026 and 2027, with inflation adjustments after that. Employer contributions of up to $2,500 count toward it. The $1,000 federal pilot deposit does not.

When can money be withdrawn?

Not during the growth period, which ends before January 1 of the year the child turns 18, apart from narrow exceptions. After that, IRA-style rules generally apply.