Wealth Management Strategies for High-Income W-2 Families in California and Washington

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

For a high-income W-2 family, the wealth management strategies that move the needle are few: control the tax on wages and equity pay, sell down concentrated employer stock on a schedule, fill every tax-advantaged account your benefits allow, put estate documents and guardianship in place, fund the kids’ accounts in the right order, and write down how you make these decisions. Investment selection matters less than most people think. The rest of this page shows how each strategy works for a California or Washington household earning $750,000 to $3 million, with numbers.

Most wealth management advice is written either for retirees drawing down a portfolio or for families with $30 million or more and a family business. A dual-income household of a physician and a biotech employee, or an Amazon director, sits in between: very high income, a large share of it in stock, young children, and very little time. The priorities are different, so the order below is different too.

Strategy 1: Plan for the tax on RSUs before they vest

RSUs are taxed as wages when the shares are delivered at vest. For 2026, employers commonly withhold federal tax on this supplemental pay at a flat 22%, rising to a mandatory 37% only on supplemental wages above $1,000,000 in the year (IRS Publication 15, 2026). A family in the 35% or 37% bracket owes far more than 22%, and the gap shows up as an April bill.

Worked example: a $1.2 million California household

Assumptions: married filing jointly, California residents, two earners. One spouse is a physician with $550,000 of salary. The other works at a Bay Area biotech with $250,000 of base pay and $400,000 of RSUs vesting in 2026. The employer uses the 22% flat rate. Taxable income before the RSUs is about $750,000 after deductions (their SALT deduction is held at the $10,000 floor, because the 2026 cap of $40,400 phases down for joint MAGI above $505,000; P.L. 119-21).

That shortfall is before California. At this income the next dollar of wages also carries California’s 11.3% bracket (2025 schedule, the latest published), the 1% Behavioral Health Services Tax on taxable income over $1,000,000 (FTB 2025 rate schedules), 1.3% California SDI on all wages with no cap for 2026 (EDD), and Medicare tax of 1.45% plus the 0.9% Additional Medicare Tax. Added up, the top portion of this family’s RSU income is taxed at roughly 53 cents on the dollar (37% federal + 11.3% California + 1% Behavioral Health Services Tax + 1.3% SDI + 1.45% Medicare + 0.9% Additional Medicare Tax). SDI alone on $1.2 million of wages is $15,600 for 2026.

The decision here is simple: raise W-4 withholding on salary, or make quarterly estimated payments, so the April bill is planned rather than a surprise. It is also the right moment to check whether the family’s penalty safe harbor is being met.

Strategy 2: Sell down employer stock on a written schedule

The most common risk we see in this group is not a bad fund. It is a large share of liquid net worth, sometimes most of it, in one employer’s shares, tied to the same company that pays the salary. If the stock falls, the bonus, the refresh grants and sometimes the job are at risk at the same time.

A useful fact many families miss: RSU shares have a cost basis equal to their value on the vest date, because the family already paid wage tax on that value (IRS Publication 525). Selling shortly after vest usually creates little or no extra gain. Holding “to avoid taxes” often avoids almost nothing and keeps the concentration.

For older, appreciated shares, the tax cost of selling differs by state:

Sources: IRS Rev. Proc. 2025-32, IRS NIIT page, FTB capital gains, WA DOR capital gains tax.

The family decides three things once, in writing: the maximum share of net worth they will hold in employer stock, what happens to each new vest (sold at vest, or held up to the cap), and how older shares are sold down over two to four tax years. Washington families should also note that the state has enacted a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028 (WA DOR), so for households like these “no state income tax” holds only through the end of 2027. More on the risk side is on our investment risk management page.

Strategy 3: Fill the tax-advantaged accounts your benefits allow

High earners are phased out of direct Roth IRA contributions (the 2026 joint phase-out is $242,000 to $252,000 of MAGI), but workplace benefits give them far more room than most families use. For 2026 (IRS Notice 2025-67, Rev. Proc. 2025-19):

• 401(k) or 403(b) deferral: $24,500 per person.
• Total annual additions, including employer money and after-tax contributions: $72,000 per person. If the plan allows after-tax contributions and in-plan conversion, the space between your deferral plus match and $72,000 is the mega backdoor Roth. With a $24,500 deferral and a $12,000 match, that is $35,500 more per year into Roth money.
• Backdoor Roth IRA: a nondeductible IRA contribution of up to $7,500 per spouse, then converted. It works cleanly only for a spouse who holds no pre-tax IRA balances (traditional, rollover, SEP or SIMPLE), because the pro-rata rule is applied to each spouse’s own IRAs.
• HSA: $8,750 for family coverage with a qualifying high-deductible plan.
• Dependent care FSA: $7,500 per household for 2026, up from $5,000, if the employer’s plan adopts the higher limit (P.L. 119-21, §70404). With children under 12 in daycare or after-school care, this is money you would spend anyway.

A couple where both employers offer a mega backdoor Roth can shelter roughly $144,000 a year across both plans, plus $15,000 in backdoor Roth IRAs and $8,750 in an HSA. Over the 15 years before the kids reach college, the difference between using this room and ignoring it is one of the largest controllable numbers in the whole plan. Our tax management work starts here.

Strategy 4: Put the estate documents and guardianship in place now

For 2026 the federal estate and gift tax exclusion is $15,000,000 per person, made permanent by the 2025 tax law and indexed from 2027 (IRS). The old claim that it drops to about $7 million in 2026 is obsolete. Most families in this income range are unlikely to owe federal estate tax.

Washington is different. Its state estate tax applies above $3,000,000 for deaths from July 1 to December 31, 2026 ($3,076,000 for deaths in the first half of the year) (WA DOR estate tax tables). A Seattle family with a paid-down home and a large Amazon stock position can pass that line sooner than they expect.

For parents of young children, the urgent documents are not about tax at all:

1. Wills that name a guardian for the children, and a backup.
2. A revocable living trust that holds the house and brokerage accounts, which in California keeps them out of probate.
3. A trust for the children instead of leaving assets outright. Under California law, a UTMA account passes to the child at 18 by default, no later than 21 for a lifetime gift that says so, or no later than 25 when a will or trust sets it up (Cal. Probate Code §3920.5). In Washington, UTMA gifts and transfers under a will or trust generally end at 21 (RCW 11.114.200). A trust lets you choose the ages and the conditions.
4. Beneficiary designations on 401(k)s and life insurance that match the trust plan.
5. Term life insurance sized to the years of income the family would lose.

See our estate planning page for how this fits together.

Strategy 5: Fund the kids’ accounts in the right order

For children under 12, the order usually is: 529 plans for education, then taxable accounts in the parents’ names, and UTMA accounts only when the family is comfortable with the child owning the money at 18 to 21. A child’s investment income over $2,700 is taxed at the parents’ rate for 2026 (the kiddie tax), which limits what a UTMA can save in tax.

A 529 can be front-loaded: each parent can contribute up to $95,000 per child in 2026 by electing to spread it over five years of the $19,000 annual gift exclusion, or $190,000 per child for a couple, reported on Form 709 (Form 709 instructions). California gives no state deduction for 529 contributions, but growth is free of California tax when withdrawn for qualified higher education expenses. If a child has real earned income, such as modeling or a job, a custodial Roth IRA is also possible up to the lesser of their earnings or $7,500 for 2026.

Strategy 6: Give on purpose, with appreciated stock

Families who give meaningful amounts each year to schools, their place of worship or other charities usually do better giving long-held appreciated shares than cash. The family avoids the capital gains tax on the shares, including California’s full ordinary rate on the gain, and the charity receives the full value. A donor-advised fund lets you give a large block of shares in a high-income year, such as a year with a big vest, and grant it out over time. Giving is also one of the easiest ways to show children how the family’s values turn into money decisions.

What changes as the family approaches ultra high net worth

There is no legal definition of ultra high net worth. The practical line for planning is when a married couple’s estate starts to approach the combined federal exclusion of $30,000,000 for 2026 ($15,000,000 each), or when a Washington family is already well above the state’s $3,000,000 line. At that point the list above stays, and new work gets added:

• Lifetime gifts to irrevocable trusts, using the $15,000,000 exclusion and the $15,000,000 GST exemption while asset values are still growing.
• Annual exclusion gifts of $19,000 per recipient ($38,000 from a couple) made every year, not occasionally.
• Family governance: regular family meetings, a written statement of how the family decides, and a plan for when and how children learn about the money. This is also where families who own a business together set rules for roles and ownership. Our family governance page covers this.

For a map of the earlier stages, see the 7 stages of wealth. For what advice at this level costs, see how much a wealth manager costs.

Common mistakes we see at this income level

• Treating the 22% RSU withholding as the tax owed.
• Holding vested RSUs to “save tax” when the basis is already close to market value.
• Leaving mega backdoor Roth room unused because nobody checked the plan document.
• Rolling an old 401(k) into an IRA, which then breaks the backdoor Roth through the pro-rata rule.
• Naming a guardian in conversation but never in a signed will.
• Putting large sums in UTMA accounts without deciding whether an 18-year-old should control them.

Strategy 7: Write down how you make these decisions

Every strategy above is a decision the parents made for a reason: why they sell stock at vest, why the trust delays distributions to 30, why they give to the causes they give to. The children see the results but not the reasoning. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.”

A short written note for each major decision (what we chose, what we considered, why) takes under an hour and becomes part of the family’s FamilyKnowledge® Library. When the kids are old enough, it is the curriculum. This is the core of Age Five Family Office™ work and of Age Five Wealth Education.

A one-page checklist for this year

1. Estimate the RSU withholding gap for 2026 and adjust withholding or estimates.
2. Set a written cap on employer stock and a rule for each new vest.
3. Confirm with HR whether both 401(k) plans allow after-tax contributions and in-plan conversion.
4. Elect the $7,500 dependent care FSA at open enrollment if the plan offers it.
5. Sign wills with guardians, a revocable trust and matching beneficiary forms.
6. Decide the 529 funding plan for each child.
7. Write one decision note this month.

This is general education, and the right move depends on your family’s full picture. If you want a second set of eyes on your numbers, the Tax & Wealth Assessment is a practical place to start.

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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