This is how my wife and I are saving for our son's future. We gift him money (you can each gift up to the limit without reporting it or decreasing the lifetime gift limit) and then we invest the money on his behalf via a UTMA account with Vanguard.

He'll owe taxes upon withdrawal in the future, 17 years from now at the earliest, but he'll also have full freedom to use the money any way he sees fit. So school, starting a business, buying a house or letting the investment ride until retirement.

You might want to look into putting some of that money into a 529 plan; that allows the kid to pay for college without paying taxes on the gains.

It's a risk if the kid doesn't end up going to college; you end up paying, I think, regular taxes on the earnings plus like 10% penalty.

Still, 17 years of tax free growth would be a pretty good reward if the kid does go to school.

Or blackjack and hookers...

It's possible. I hope that he'll use the money in ways his mom and I would consider to be more constructive, but once he is old enough he gets control of the account and we have no say in it. Fingers crossed.

Note that it is $15k ($14k last I checked, but it may have risen) per gifter-giftee pair.

So I can give my son $14k, my wife can give my son $14k, and we can both given my daughter a combined $28k all without even registering against the $5 million lifetime exclusion or paying any gift taxes. And couples can do that every single year for decades, which adds up to millions even without touching the exclusion.

> $15,000 per year

Importantly, per person receiving. In principle you have a virtually infinite tax-free gift giving exception available if you distribute your assets to enough people.

Per person receiving and person giving pair. So, a married couple can give their child $30K/yr and could give the child’s significant other another $30K/yr.