This month, my husband and I celebrated 9 months with our sweet Amelia. Coincidentally, the time I had her in my belly was the exact amount of time she has been earthside when her 9-month milestone came round. I gave birth at 39 weeks 1 day, and she was 39 weeks, 1 day old as she turned 9 months.

The time has gone by so fast, but some days seem so slow too. I do my best to enjoy every moment, no matter what the day brings.

When she made her appearance last year, my husband and I knew we wanted to start saving for her future. When we considered what type of account to open, we had many accounts to choose from, such as:

• A Taxable Custodial Investment Account, also known as an UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) account. This is a taxable investment account that is in the child’s name and legally becomes their asset when they reach the age of majority (ranging from ages 18 to 21). It’s in custody for the child while they are a minor, but it will pass to them to do with as they please when they become an adult.

  Custodial accounts do not have contribution limits or early withdrawal penalties. Although, contributions are irrevocable and cannot be withdrawn by a parent or guardian (unless it’s for the benefit of the child). One of the major advantages of custodial accounts is they are a great way to give a financial gift and reduce your potential estate tax burden as a parent, guardian, or loved one.

  In regard to taxation, a portion (up to $1,350 in 2026) of any earnings from a custodial account may be exempt from federal income tax. Furthermore, another $1,350 of earnings in excess of the exempt amount may be taxed at the child’s tax rate, which is generally lower than the parent’s tax rate. Earnings in the custodial account of more than $2,700 are subject to the parent’s tax rate.

 

• A regular Taxable Investment Account, simply earmarked for the child. This is a taxable investment account that is not in the child’s name and does not become their asset when they reach adulthood. This would be an account in the name of the parent or guardian, and they would choose if and when to gift the money to the child.

  Like the UTMA accounts, these accounts do not have contribution limits or early withdrawal penalties.

  Unlike the UTMA accounts, the contributions are revocable and there is no current estate planning advantage of deferring money into this account. Taxation of earnings is subject to the account owners’ rate.

 

• A Custodial Roth IRA. A retirement account which is in custody for the child until they reach age of majority (ranging from ages 18 to 21). This account is funded with post-tax dollars and used to save for retirement. There are limits on annual contributions and early withdrawal penalties may apply. Earnings grow tax free, and if you make a qualified withdrawal, you do not pay taxes on the money withdrawn. Furthermore, there are some unique features with the Roth IRA which allow contributions to be withdrawn tax and penalty free, as long as you meet certain requirements. Although the Roth IRA should be for retirement – it can be useful to have the option to access the contributions if necessary.

 

• A 529 college savings account. This account allows contributions to grow tax free and be used for qualified education expenses. Qualified withdrawal rules span a wide range such as expenses for university, trade school, and even some K-12 private schools. Although there are limits on how much you can use towards private school education.

  If you withdraw money from the accounts for an unqualified expense, the earnings are taxed and the withdrawal is also penalized. Although you may be able to roll over the unused funds into a Roth IRA for the child’s benefit, if you meet certain requirements.

  There are state enforced contribution limits, but they are usually in the hundreds of thousands. In Oregon, the limit for 2025 is $400,000. While the contribution limit is a bit of a moot point, gift tax considerations may come into play. In 2026, you can gift up to $19,000 (and married couples filing jointly up to $38,000) in a single 529 plan without the gift counting against your lifetime gift tax exemption amount. You also have the option to “superfund” a 529 plan with up to 5 years’ worth of contributions (or $95,000) in a single year—without triggering federal gift taxes.

Out of these options, my husband and I ultimately decided on an individual investment account that is in our names, and a 529 college savings account, for now.

Whether she chooses to go to college, a trade school, be an entrepreneur, buy a house, or join the military – we want to have a sum of money for her when she spreads her wings and flies out of the nest. The individual investment account can provide funds to her no matter what her dreams may be.

The main reason we decided to keep it in our names for now was we wanted her to have a sense of ownership over her future and didn’t want her to feel like she has a huge cushion to fall back on once she turns 18. We hope she always feels she can come to us for help if she needs it, but since my husband and I had to figure out ways to fund our education and begin our adult lives mostly independently, we see the value in it. We want this pot of money to be a surprise to her and feel like a gift rather than something she is entitled to.

Furthermore, while she may or may not go to college, we want to have funds set aside in a 529 account for her. It is nice to know that if she doesn’t end up pursuing the college route, we can roll over a good chunk of the funds into a Roth IRA for her benefit. In lieu of gifts for Christmas, birthdays, and other big holidays, we’ve encouraged friends and family to contribute to her 529 account. Especially when she is young and won’t remember the gifts people give her.

Once she is old enough to earn money through chores or other “work” – we will help her learn the importance of saving her money which will go into a Custodial Roth IRA for her benefit.

A real-world example of how this kind of planning impacts our young ones’ financial wellbeing is Erik and his family. As his kids were growing up, he had them put 10% of their income into a Roth IRA, which they still have today. In addition, 40% of their earnings went into each of their UTMA accounts. Upon graduating, Adam used his UTMA to travel all over Europe with his backpack. Benjamin bought a car with the funds. Athena went to France and used the remainder as pocket money while studying in Norway for her gap year.

While I don’t know what Amelia’s future will bring, I hope we can prepare her as much as possible both financially and personally so she knows she can achieve anything she wishes and always has the support of her parents. How we plan to help her develop financial literacy is another topic which I’ll explore in a future newsletter.

Which accounts you choose to open and fund for your young one depend not only on your personal beliefs and hopes, but also on your tax planning and estate planning goals. Let us know if you have any questions about how to set your young ones up for success.

About TenBridge Partners

TenBridge Partners is an independent financial planning and investment management firm based in Portland, Oregon with a simple focus of honoring the fiduciary responsibility of putting clients first. Guiding with curiosity and trusted expertise, we empower people to live their unique story with financial clarity and confidence.

Planning is central to everything we do. Our focus is on a complete understanding of your needs through the financial planning process, putting your success at the heart of our work.

We strive to create a community where financial planning feels fun, dynamic, and human.

Sirra Anderson Crum CFP®
Financial Planner

The information contained in this correspondence is intended for general educational purposes only and as a means for facilitating a conversation.  Please consider our door always open to discuss your particular situation and how this information might benefit you and fit your specific needs.