Assuming that the will that bequeathed the money to your son did
not stipulate any restrictions or set up a trust to hold the money
until your son turns 25, or something like that,
I don't think you have much choice except to put the money
in a UTMA account (which of course can be invested in whatever
the trustee (which could be you, or you and your wife jointly) decides.
Note: not a UGMA account since the money is not a gift.
You also don't have any option except
to turn the account over to your son when he turns eighteen.
The point is, the investment can be in anything as long as the
account is registered as a UTMA account. But do remember also that
your son is entitled to sue you for breach of fiduciary duty
if you don't take good care of the money, so that blowing it
all in risky investments is also not a good idea.
If you are worried about taxes and your son's income
being taxed at your rate, one way of deferring the issue
is to buy US Savings Bonds. The interest can be deferred
from taxation until the bonds are redeemed.
Edit added in response to JoeTaxpayer's comments:
But a better strategy is to declare the accrued interest
each year as unearned income of the child
on the kiddie tax form that is part of your
tax return, and pay the tax, if any, that results
To ease your mind or conscience,
think of the tax that you pay on your child's
behalf as a gift to your child!
In any case, there will likely not
be much tax due since the first $950 of unearned
income of a child is tax-free and the next $950 taxed at 10%.
Then, when the bonds are cashed in, the interest that
accrued (and was "taxed") in earlier years can be deducted
from the interest (cash in price minus purchase price)
that you (or your son)
will be told is the interest that the bonds earned.
Of course, if kiddie tax is not a concern (and it shouldn't
be, given the amount available for investment),
an even better strategy is to set up the
UTMA account(s) in long-term investments in low-cost
index funds or ETFs (as JoeTaxpayer suggests)
and pay the tax, if any, as it comes