Treasury, IRS Propose Tight Rules for Trump Accounts

The Treasury Department and the Internal Revenue Service released proposed regulations that would restrict investments in new Section 530A accounts, known as “Trump accounts,” to low-fee, unleveraged U.S. index funds during the accounts’ growth period. The agencies are accepting written public comments through Oct. 20.

Under the proposal, eligible investments during the growth period — which runs until the beneficiary turns 18 — would include index funds that primarily hold U.S. companies, use no leverage and carry expense ratios of 0.10% or less. After the beneficiary reaches 18, the account would convert to a traditional individual retirement account with a wider set of investment choices. The accounts launched on July 4; Treasury Secretary Scott Bessent promoted them at an event at Wheeler High School in Marietta, Georgia, on July 22.

Treasury and IRS officials described the rules as an effort to define a clear set of eligible investments for the growth period so parents and guardians have straightforward choices. The agencies asked for comments on the fee threshold, the U.S.-only index requirement, the prohibition on leverage and how the transition to broader IRA investments at age 18 should be handled.

Advisers offered mixed reactions to the prescribed list. Eric Bronnenkant, head of tax at Edelman Financial Engines, called the proposed limits unusually prescriptive for tax-advantaged accounts and noted that tax rules rarely define investment choices so narrowly. He also said limiting options can reduce decision paralysis for account owners unfamiliar with investing.

Daniele Griffith, director of tax operations at April Tax Solutions, welcomed the expansion beyond the four index ETFs initially offered at launch. She said a broader set of U.S.-focused index funds will include a wider range of market capitalizations and sectors, which should reduce volatility compared with single-stock or narrow-sector choices. Griffith added that a short, clear list of options may make it easier for people to open and manage accounts.

Griffith and other advisers also argued that conservative, low-fee index funds may not be the optimal allocation for very young beneficiaries with long time horizons. They noted that investors seeding a child’s eventual retirement or long-term goals might accept higher equity exposure for infants and toddlers because there is time to ride out market swings.

Legal and estate-planning professionals offered a different view. Benjamin Sunshine, a senior associate in wills, trusts and estates at Brinkley Morgan, argued conservative investments during the growth period are defensible because account owners are minors, and added that a conservative approach aligns with protecting assets held for children.

Observers compared Trump accounts with existing vehicles such as 529 education savings plans and taxable custodial accounts. Supporters cite tax advantages, low costs and simplified choices. Critics raised concerns that tightly prescribed options could reduce potential long-term returns or exclude popular funds that slightly exceed the fee cap or include limited non-U.S. exposure.

Public input will shape the final regulations. Financial advisers, fund managers and other stakeholders are expected to weigh in by Oct. 20 on whether the proposed criteria strike the right balance between protecting inexperienced account holders and allowing parents to pursue higher-growth strategies for very young beneficiaries.