After formation of trench capacitors and source and drain regions and gate structures for access transistors, a dielectric spacer is formed on a first sidewall of each source region, while a second sidewall of each source region and sidewalls of drain regions are physically exposed. Each dielectric spacer can be employed as an etch mask during removal of trench top dielectric portions to form strap cavities for forming strap structures. Optionally, selective deposition of a semiconductor material can be performed to form raised source and drain regions. In this case, the raised source regions grow only from the first sidewalls and do not grow from the second sidewalls. The raised source regions can be employed as a part of an etch mask during formation of the strap cavities. The strap structures are formed as self-aligned structures that are electrically isolated from adjacent access transistors by the dielectric spacers.