Gifts seem to always come to mind this time of year. Giving can be an important estate tax planning strategy if your estate is larger than the Illinois estate tax exemption. More farm families have been exploring this as a result of the wide disparity between the Illinois estate tax exemption limit of $4 million and the federal exemption, which will be $11.4 million in 2019.

Before we get to the tax savings, however, consider something more important. Deeding property to your children may seem like a simple way to reduce your estate, but it is very shortsighted and often cause for regret.

So, when you make gifts, think very long term and be smart about it — and make the gift to your child in a trust.  What sort of trust?

The most obvious characteristic you want is that the trust does not inflate your child’s estate. You have an estate tax problem because you own too much stuff. If you give your son or daughter property, you are helping them get too much stuff even earlier in life. This is known as “kicking the can down the road.” The trust should be designed so the assets won’t be considered part of your child’s estate.

That kind of trust will also provide great protections against unfortunate events that can happen to the child. No one expects to lose their estate to divorce, a lawsuit or nursing home costs. But giving assets to your child in trust is the strongest available assurance that those threats will never touch what you gave them.

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But in designing the trust, there is more to consider.

Are you sure your child is 100% capable of handling the assets? If so, then remember Norman Rockefeller’s advice: “The secret to success is to own nothing but control everything.” The trust for such a child should be drafted so he or she has very broad control over the property placed in the trust. Don’t tie their hands.

On the other hand, one source of later regret is when a child gets property he or she wasn’t prepared to manage, and misuse the control and lose or waste the assets. If a child isn’t ready for full control, the trust should include restrictions and accountability, at least for a while. That is just being wise.

You don’t get a second chance to give something away, so if you make gifts to reduce your estate tax exposure, make the gifts into trusts for your family. So how much tax savings can be achieved by giving away part of your estate?

If your estate is worth $7 million, and you die in 2019, there would be no federal estate tax to pay. But your heirs will pay Illinois around $565,000. If while you are living you gave away $2 million and then died with the remaining $5 million, your heirs’ tax to Illinois is reduced by 37%, to $352,000. If you gave as much as $4 million, and died with $3 million, your heirs’ tax drops to $167,000.

What if your estate is worth $10 million? There would still be no federal estate tax, but your heirs would pay Illinois $926,923. If you gave $4 million away while living, the tax on your remaining $6 million at death drops to $456,000. If you gave away $8 million and died with only $2 million, your heirs pay only $92,000.

No gift tax would be due on any of these gifts. But there is one clear downside to giving away property while living. Your tax basis is carried over to the child, and there is no chance for a stepped-up basis on your death. If the property won’t be sold during your child’s life, however, that matters little.

Another consideration, of course, is whether you are ready to give up the assets now. Carefully structured, you can give away the property while retaining at least some of the income it produces.

All things considered, if your estate is worth more than $4 million, strategic planned giving may be something to consider within your overall estate plan.

Ferguson is an attorney who owns The Estate Planning Center in Salem, Ill. Learn more at thefarmersestateplanningattorneys.com.