The Treasury Department and the IRS have proposed a set of rules that would shape how money grows inside Trump Accounts, the new tax-favored savings accounts created for children under last year’s tax law. The proposal would cap the annual fees on the investments held in these accounts at one-tenth of one percent and would restrict the money to low-cost funds that track broad U.S. stock indexes. Because the rules are only proposed, nothing is final yet, and the public has until October to weigh in before anything takes effect.
What the IRS is proposing
Under the proposed regulations, an eligible Trump Account investment would have to be a mutual fund or exchange-traded fund that tracks an equity index made up primarily of U.S. companies, such as the S&P 500. The fund could not use leverage, and its annual fees and expenses could not exceed 0.1 percent of the fund’s balance. The stated aim is to keep costs low and holdings simple in accounts meant to compound over a child’s entire youth.
The proposed guidance was filed on August 20 and would generally apply to tax years beginning on or after January 1, 2026, though it would not become binding unless and until it is finalized. Until then, the framework is a blueprint open to revision rather than a rule that families or financial institutions must follow.
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What the 0.1% fee ceiling would cover
The proposal makes clear that the 0.1 percent ceiling would apply to both fund-level fees and the fund’s operating expenses. It would not, however, cap the separate trustee fees a financial institution might charge to hold the account itself. That distinction matters for families deciding where to open an account: the rule as proposed would police the cost of the investment but not every cost of the account. Over the many years a Trump Account could stay invested, even a small difference in fund fees can meaningfully change the ending balance, which is why the low ceiling is central to the plan. The restriction would also push these accounts toward the kind of plain index funds that many retirement savers already favor for the same cost reasons.
How idle accounts would be invested
The proposed rules would also address what happens when no one chooses an investment. If the person responsible for a child’s account did not select an eligible fund offered by the trustee, the money would be automatically invested during the account’s growth period in a default eligible investment chosen by the trustee. Under the proposal, trustees would be required to designate that default option for any uninvested contributions and to disclose it to account holders. Treasury has separately identified a low-cost S&P 500 index fund as an initial default and named several other qualifying index funds that families could choose instead. Trustees would also have to review each fund’s eligibility at least once every 12 months and, if a fund fell out of compliance, would generally have about 30 days to sell it and move the proceeds into a qualifying fund.
How long the restrictions would last
The investment limits would not apply forever. As proposed, the growth period would begin when a child’s account is first established and end on December 31 of the calendar year in which the beneficiary turns 17. After that point, the eligible-investment restrictions would no longer apply, giving the now-older account holder more freedom in how the balance is invested. That structure would keep the accounts in simple, low-cost index holdings through childhood — the stretch when steady, low-fee compounding does the most work — before loosening the rules as the beneficiary approaches adulthood.
What comes next
Because these are proposed regulations rather than final ones, the details could still change. The IRS has asked for public comments through October 20, 2026, and interested parties can review the agency’s announcements through the IRS newsroom. Grandparents and parents thinking about funding an account for a child or grandchild would be watching a rule that is still taking shape: the fee cap, the index-fund limit, and the automatic-default mechanism are all on the table, but none is locked in until the government issues a final version after the comment window closes.
This article was researched and drafted with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
