Should I give away my assets now or wait until I’m dead? This is an important question to ask when making plans for your estate. You might wish to help your kids or grandkids buy a house or start college right now instead of waiting. Moving assets before you die can have an immediate effect and may cut taxes in the future, but it also has its downsides. Let’s look at the good and bad sides of providing an inheritance before you die.
Why Gift While You’re Living?
Gifting while alive has some big benefits:
- See the difference now: Instead of waiting, your loved ones can use the present right away, such as to pay for school or a mortgage.
- Shrink estate taxes: Gifts take assets out of your estate, which lowers estate taxes later. (Estates worth more than $4 million are exclusively taxed in Illinois.)
- Stay in control: You can set conditions (e.g., “use this for education”) or use trusts to manage how the gift is used.
- Avoid probate: Gifting assets now typically means that heirs don’t have to go through probate. For instance, Illinois has a Transfer-On-Death deed that lets your home go straight to a beneficiary.
Gift Tax Basics
The IRS lets you give a specific amount each year without having to pay taxes on it. The yearly exclusion will be $19,000 per person in 2025 (it was $18,000 in 2024). You can give $19,000 to each individual without paying gift tax or filing out any forms. If you’re married, you can give twice that amount. You only have to submit a gift tax return if you go over those restrictions, and even then, you usually won’t have to pay taxes unless you’ve already used up the big lifetime exemption.
Each $19,000 is like a present you give that individual before you die. These donations will make your estate smaller over time. And don’t forget that giving someone money directly for their college or medical fees doesn’t qualify as a gift. You can pay for a grandchild’s college or family medical expenditures without going over the limit.
What Counts as a Gift?
A gift is anything you transfer without getting equal value back. Common examples include:
- Cash: Giving money in a check or bank transfer.
- Investments: Transferring stocks, bonds, cryptocurrency, etc. (The recipient takes your original cost basis.)
- Real Estate: You can deed property to family or add a joint owner. (See TOD deed below.)
- Forgiven Loans: If you cancel a debt a relative owes you, that amount is a gift.
- Personal Property: Cars, jewelry, art — anything valuable you give.
Gifts to a spouse (if a U.S. citizen) or to charity generally aren’t taxed.
Appreciated Assets and Basis
One thing to keep in mind is that if you give someone something that has gone up in value, they will get the original cost basis. Let’s say you bought a house for $100,000 and now it’s worth $300,000. If you give it to your child, their basis stays at $100,000. If they sold it, they would have to pay tax on the $200,000 gain. The base goes up to $300,000 if they inherit it instead; therefore, selling it soon could mean essentially no capital gains. This “step-up” benefit applies to inherited assets; thus, giving up assets that have gone up a lot in value can leave your heirs with significant tax payments.
Smart Strategies for Giving
If you do give gifts early, consider these tactics:
- 529 Plans: You can contribute up to five years’ worth of donations all at once. In 2025, each beneficiary will get $95,000 for a college savings plan through a special election. The money grows tax-free for school.
- Trusts: An irrevocable trust can keep gifts for beneficiaries on specified conditions, such as delayed distributions. This usually keeps the assets out of your estate.
- Family Loans: Instead of giving a relative a present, give them a formal, low-interest loan for a house, business, or something else. They enjoy the advantage now, and it can help you avoid paying gift taxes.
Illinois-Specific Considerations
Illinois has a useful way to move property before you die. You can record a Transfer-On-Death (TOD) deed for property. This implies that you name a beneficiary now, and after you die, the property goes to them without going through probate. While you’re alive, you own it everything. It’s basically a complicated strategy to give your home to an heir before you die.
Also, keep in mind that Illinois only taxes estates worth more than $4 million. Gifts can help keep your estate under that. The Illinois estate tax still applies if your estate (after gifts) is worth more than $4 million. Lastly, Illinois has a 5-year Medicaid lookback period. If you give a lot of money too close to requiring long-term care, it could damage your eligibility. If that’s a worry, talk to a lawyer.
Downsides of Gifting Early
Gifting has risks:
- Lost control: Once the gift is out of your hands, you can’t take it back.
- Family fairness: Giving big gifts to one child and not another can cause hurt feelings or disputes.
- Your own needs: Make sure you save enough for emergencies, retirement, and health care. Don’t give away so much that you put your own safety at risk.
- Capital gains for heirs: As explained, gifts of appreciated assets can push big tax bills onto beneficiaries.
How to Transfer Assets Before You Die
If you choose to gift assets now, here’s a quick roadmap:
- Inventory: List your cash, investments, property, etc., and to whom you intend to give them.
- Set goals: Decide which gifts to make and when. Communicate your plan with your family.
- Use exclusions: You can give each person up to $19,000 each year. Keep track of your contributions, and if they are over the yearly limit, file IRS Form 709.
- Transfer formally: Use cheques or transfer papers to move cash and investments. For real estate, sign and file deeds (or TOD deeds). When you can, pay your tuition and medical bills directly.
- Update your plan: After gifting, update your will, trusts, and beneficiary designations to show how your assets will be divided.
- Consult experts: An Illinois estate planning lawyer and CPA can help you follow the law and save the most money on taxes.
Ready to Plan? Let 23 Legal Help You Transfer Assets With Confidence
Deciding to transfer assets before death is a personal choice. It can be a great method to support your family today and pay taxes, but you need to plan. Talk to an Illinois estate planning lawyer or tax counselor if you’re thinking about giving gifts. They can help you establish a plan that fits your needs using donations, trusts, TOD deeds, or other methods. Planning makes sure that your gifts really help your loved ones and enables you to see it happen in your lifetime.
So if you’re ready to talk about transferring property before you die, we’re here to help. You can come to our office in Schaumburg or call us. We’ll sit down together, just the two of us, and talk about your estate aspirations.
Frequently Asked Questions
The IRS says that in 2025, you can contribute $19,000 a year to each person without paying taxes. A married couple can each give $38,000. You only have to declare gifts that are worth more than those amounts, and you usually don’t have to pay taxes on them until you go over your lifetime exemption.
You can use a TOD (Transfer-On-Death) deed to identify who will get your property when you die. You sign and record the deed in Illinois right now. You own the house completely while you’re living, and when you die, it goes straight to your named beneficiary (no probate).
Gifts do reduce the size of your taxable estate. If you give away enough money to get your estate below $4 million, you won’t have to pay taxes on it. The Illinois estate tax still applies, though, if your estate is worth more than $4 million. (Keep in mind that the federal estate tax has a far greater exemption, which will be nearly $13.9 million in 2025.)
Why Choose 23 Legal
23 Legal offers Real Estate and Estate Planning legal services to individuals, families, community associations and small business owners throughout Chicagoland. We know how intimidating “the law” can be. In fact, when most people think of law offices, they think of stuffy leather chairs, huge wooden desks and pompous lawyers who charge outrageous fees. That’s not us! We believe in 1-to-1; the same lawyer should work with you all the way through. Whether you have an estate planning issue, family trust concern, or you have a legal problem in regard to a new home, business, real estate or remodel, you need a lawyer who cares. That’s where Ben comes in! We are great listeners; more than that, we are lawyers who believe that our clients always come first.