Financial Advice for High Net Worth Families: 10 Strategies for Parents of Young Children

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

Good financial advice for high net worth families with young children starts with cash flow and taxes, not with picking investments. For a two-income household earning $750,000 to $3 million in California or Washington, the decisions that move the most money are usually: RSU tax withholding, how much goes into workplace retirement plans, how concentrated the family is in one employer’s stock, how the kids’ accounts are set up, and who raises the children if both parents die. Investment selection matters, but it rarely matters as much as those five.

The advice is also worth paying for only if the adviser is a fiduciary who does not earn commissions on products. Below are ten strategies, a worked example for a $1.1 million Bay Area household, how the same family looks in Washington, and what to ask before you hire anyone.

The worked example: a $1.1 million W-2 household in San Mateo

Every number in this article uses one illustrative family. Assumptions, all for 2026:

• Parent A is a physician employed by a hospital system: $450,000 salary.
• Parent B is a scientist at a South San Francisco biotech: $300,000 salary plus $350,000 of RSUs vesting during the year.
• Total W-2 pay: $1,100,000. Two children, ages 4 and 7. Married filing jointly.
• Each parent defers $24,500 into a 401(k) or 403(b), and they use a $7,500 dependent care FSA.
• Itemized deductions of about $40,000 (property tax limited by the SALT cap, plus mortgage interest).

That puts federal taxable income near $1,003,500 ($1,100,000 minus $49,000 of deferrals, $7,500 of dependent care FSA and $40,000 of deductions). The family is in the 37% federal bracket, which for 2026 starts at $768,700 of taxable income for joint filers (IRS Rev. Proc. 2025-32). In California the same income sits in the 11.3% bracket on the 2025 schedule, with the 1% Behavioral Health Services Tax added on taxable income over $1,000,000, so the family’s top dollars face about 12.3% (FTB 2025 rate schedules; 2026 schedules were not yet published when this was reviewed).

Ten strategies, with what each is worth to this family

1. Close the RSU withholding gap

RSUs are taxed as wages when the shares are delivered at vest. Employers usually withhold federal tax on them at the 22% supplemental rate; the mandatory 37% rate applies only to supplemental wages over $1,000,000 in a calendar year from one employer (IRS Publication 15, 2026). Withholding is not the tax owed.

In the example, $350,000 of RSUs lands on top of $653,500 of other taxable income. About $115,200 of it is taxed at 35% and $234,800 at 37%, for roughly $127,200 of federal tax. Withholding at 22% is $77,000. The gap is about $50,200, before any California shortfall. The fix is simple: raise W-4 withholding on the salary, or make quarterly estimated payments, so the money is set aside as the shares vest instead of found in April. Note that an 83(b) election does not apply to RSUs; it applies to restricted stock and early-exercised options (Treas. Reg. §1.83-3(e)).

2. Fill both workplace retirement deferrals

For 2026 the elective deferral limit for a 401(k), 403(b) or governmental 457(b) is $24,500 per person (IRS Notice 2025-67). Two parents deferring the maximum take $49,000 out of taxable wages. At 37% federal that defers about $18,130 of federal tax, and at about 12.3% in California (the 11.3% bracket plus the 1% tax on taxable income over $1,000,000) about $6,027 more. Physicians at hospital systems often have both a 403(b) and a 457(b), which can mean two separate deferral limits (IRS guidance on deferring to more than one plan); check the plan documents, because a non-governmental 457(b) carries the employer’s credit risk.

3. Use the mega backdoor Roth when the plan allows it

The 2026 limit on total additions to one person’s 401(k), counting employee deferrals, employer contributions and after-tax contributions, is $72,000 (Notice 2025-67). If Parent B defers $24,500 and receives a $10,000 employer contribution, up to $37,500 of after-tax contributions can go in. When the plan allows in-plan Roth conversion or in-service withdrawal of those dollars, they become Roth money that grows tax-free. Many large tech and biotech plans allow this; many hospital plans do not. One phone call to the plan administrator answers it.

4. Do backdoor Roth IRAs, after checking the pro-rata rule

Direct Roth IRA contributions phase out for joint filers between $242,000 and $252,000 of modified AGI for 2026 (Notice 2025-67), so this family cannot contribute directly. The usual route is a nondeductible $7,500 traditional IRA contribution per parent, converted to Roth. The catch is the pro-rata rule: if either parent holds pre-tax money in any traditional, SEP or SIMPLE IRA, part of the conversion is taxable (IRS Form 8606 instructions). Rolling old pre-tax IRA money into a current 401(k) first, if the plan accepts it, usually removes that problem.

5. Claim the full dependent care FSA

The Child Tax Credit is $2,200 per child for 2026, but it shrinks by $50 for every $1,000 of modified AGI over $400,000 for joint filers. A two-child family reaches zero at $488,000, so this household gets nothing (Schedule 8812). The dependent care FSA is the child benefit that still works at this income. Its limit rose to $7,500 per household for 2026 under P.L. 119-21, if the employer’s plan adopts the higher limit (P.L. 119-21, §70404). At 37% that is about $2,775 of federal income tax avoided each year while the kids are in daycare, preschool or after-school care. California generally does not follow the 2025 federal law, so ask your tax preparer how the amount above $5,000 is treated on the California return.

6. Set a sell rule for employer stock before you need one

The most common risk we see in biotech and tech households is not a bad fund. It is that the employer pays the salary, the bonus, the health insurance and a large share of the net worth. If Parent B keeps every vest for four years, the family can easily hold $1 million or more in one stock while both of its biggest risks (a layoff and a price drop) point the same way.

A sell rule removes the yearly debate. For example: sell every vest on the day it is delivered unless the family’s holding is under a set percentage of liquid net worth. Selling at vest usually creates little or no extra gain, because the cost basis of RSU shares is the value already taxed as wages (IRS Publication 525). Holding vested RSUs is the same decision as using that cash to buy the stock on the open market.

7. Run taxable investments for after-tax return

For 2026, federal long-term gains for joint filers are taxed at 20% above $613,700 of taxable income, plus the 3.8% Net Investment Income Tax once modified AGI passes $250,000 (IRS NIIT page). California has no lower rate for capital gains; they are taxed as ordinary income (FTB capital gains page). A long-term gain for this family can lose about 36% to tax (20% + 3.8% + 12.3%).

That makes three habits worth more than fund choice: hold tax-inefficient assets such as taxable bonds and REITs inside retirement accounts where possible; use broad index funds or direct indexing in taxable accounts; and harvest losses when markets fall. Harvested losses offset gains, and up to $3,000 a year of net capital loss can offset ordinary income, with the rest carried forward (IRS Topic 409). Buying a substantially identical security within 30 days before or after the sale triggers the wash sale rule and defers the loss (IRS Publication 550). That includes RSU vests and ESPP purchases of the same stock.

8. Pick the right account for each child goal

• 529 plan for education. California gives no state deduction for 529 contributions, but growth is tax-deferred and qualified withdrawals are tax-free. Each parent can front-load five years of the $19,000 gift tax annual exclusion, up to $95,000 per child, or $190,000 per child for a couple, by filing Form 709 (Form 709 instructions).
• UTMA account for smaller gifts. In California the child takes control at 18 by default, or as late as 21 for a lifetime gift and 25 for a transfer by will or trust, if written into the transfer (Cal. Probate Code §3920.5). Investment income over $2,700 for 2026 is taxed at the parents’ rate under the kiddie tax.
• Trust for anything large. If the goal is a meaningful sum the child should not control at 21, a trust with its own distribution terms is the better container.
• Custodial Roth IRA later. Only possible once the child has real earned income, up to that income or $7,500 for 2026, whichever is less (IRS Publication 590-A). An allowance does not count.

9. Give appreciated shares, not cash

If the family gives $30,000 a year to charity, giving $30,000 of shares held more than a year with $20,000 of gain avoids the tax on that gain: about $4,760 federal (23.8%) and $2,460 California (12.3%), roughly $7,220 in all. A gift of long-term appreciated stock to a public charity is generally deductible at fair market value, subject to AGI limits (IRS Publication 526). A donor-advised fund lets the family give shares in one year and recommend grants later. From 2026, P.L. 119-21 also adds a 0.5% floor on charitable deductions by individuals and limits the tax benefit of itemized deductions for top-bracket filers (P.L. 119-21, §§70425 and 70111), so model the deduction before year-end rather than assuming the old math.

10. Wills, guardians, a trust, insurance and written decisions

With children under 12, the estate plan’s first job is not tax. It is naming guardians in a will, and putting assets in a revocable living trust so a successor trustee can manage them without California probate. The federal estate and gift tax basic exclusion is $15,000,000 per person for 2026, made permanent by P.L. 119-21 (IRS estate and gift tax page), so most families in this income band are planning for control, not federal estate tax. Check every beneficiary designation on 401(k)s, IRAs and life insurance; they override the will.

Insurance fills the years before savings can carry the family: term life sized to cover the mortgage, childcare and the children’s education, an own-occupation disability policy for a physician, and an umbrella liability policy. Group disability through work often has a monthly cap well below this family’s income, so read the summary plan description.

How the same family looks in Washington

Move the household to Bellevue and strategy 2’s state savings disappear, because Washington has no individual income tax for 2026 (WA DOR). Three things change the advice:

• A new income tax is coming. Washington enacted a 9.9% tax on individuals and joint filers with AGI over $1,000,000, effective January 1, 2028. This family’s AGI of about $1,043,500 would be just over the line (DOR guidance on how income is defined is still pending), so the timing of large RSU vests and option exercises in 2027 versus 2028 deserves a plan.
• Capital gains tax. Washington taxes long-term gains at 7%, rising to 9.9% on taxable gains over $1,000,000, after a standard deduction of $278,000 (2025, the latest published) (WA DOR capital gains tax). Retirement accounts and real estate are exempt.
• A state estate tax. For deaths on or after July 1, 2026, Washington’s estate tax exclusion is $3,000,000 (WA DOR estate tax tables). A house, two retirement accounts, vested stock and life insurance owned in the wrong name can pass that quickly. In Washington, the estate plan is a tax plan too.

Payroll differs as well: California withholds 1.3% SDI on all wages with no cap for 2026 (about $14,300 on this family’s $1.1 million) (EDD), while Washington’s WA Cares premium is 0.58% of wages with no cap (about $6,380) (WA Cares Fund).

What to ask before hiring a financial adviser

Several of the real searches behind this page ask for advice “that doesn’t push products.” That is the right instinct. Four questions sort most advisers quickly:

1. Are you a fiduciary at all times, in writing? Not only when giving investment advice. See what percentage of financial advisors are fiduciaries.
2. Do you or your firm receive commissions on insurance, annuities or funds? Fee-only means no.
3. How is your fee calculated, and what is it in dollars for us? A percentage of assets, a flat fee and a retainer can produce very different bills at the same service level. See how much financial planning costs.
4. Who files our taxes, reviews our equity grants and coordinates with our estate attorney? At this income, the value is in coordination across tax, employee benefits and estate planning, not in a portfolio review once a year.

Common mistakes in families at this income

• Treating 22% RSU withholding as the tax bill.
• Assuming the Child Tax Credit or a Roth IRA contribution is available without checking the income limits.
• Opening large UTMA accounts that hand money to an 18 or 21 year old.
• Letting employer stock grow to a large share of net worth by default rather than by decision.
• Having a will drafted before the children were born, or no named guardian at all.

What to write down for your kids

Each of the ten strategies above is a decision: why you sell the RSUs, why the 529 and not a UTMA, why you chose these guardians, why the family gives to the causes it gives to. Your children will see the results of those decisions for decades without ever seeing the reasoning. As Kevin Luu, Co-Founder and Chief Learning Officer of Bright Advisers, puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.”

A short memo for each major decision, one page with the choice, the reasons and what would change your mind, becomes the start of a FamilyKnowledge® Library. Our family governance work is built around exactly that.

Questions families ask

What counts as a high net worth family?

There is no single legal definition. Industry labels are usually based on investable assets, and they shift from firm to firm. For planning purposes, income, equity compensation and the number of accounts matter more than any label: they set how complex the tax and estate work is.

Do we need a family office, or just a financial planner?

A single planner can handle investments and a yearly plan. Once a family has two incomes with RSUs or deferred compensation, several retirement plans, kids’ accounts, a trust and rising tax complexity, the work becomes coordination: tax return, equity decisions, estate documents and insurance reviewed together. That coordination, plus teaching the children, is what a family office model is designed for.

Your next step

Pull last year’s tax return and your most recent pay stubs, and check three numbers: how much federal tax was withheld on RSU vests, whether both parents hit the $24,500 deferral limit, and whether your will names a guardian. Those three answers usually show where the gaps are. If you would like a second set of eyes, a Tax & Wealth Assessment from Age Five Family Office™ walks through them with you.

This is general education, not individual tax, legal or investment advice. The right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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