A client from Manhattan sat in my office last week with a question I hear often. “My daughter is trying to buy her first apartment,” he said. “I want to help with the down payment. Should I just write her a check now, or is it better to leave her the money in my will?”
This is the central question of stewardship: not just transferring wealth, but when and how. The choice between a lifetime gift and a posthumous bequest is fundamental. Each path has different consequences for your control, your taxes, and your family’s ultimate benefit.
The Matter of Control
The most immediate difference between a gift and a bequest is control. A gift is a present-day transfer. Once you give it, it’s gone. You relinquish ownership, and the recipient can do with it as they please. This can be a wonderful thing—seeing your child enjoy the security of a new home or a grandchild’s education funded is a powerful motivator. But it requires an intentional release of control.
A bequest is different. It is a transfer specified in your will that only occurs after your death. Until that moment, the asset remains yours. You can manage it, sell it, or change your mind about who receives it by simply updating your will. The bequest is a contingency, not a current reality. For many people I work with, this retention of control is critical, especially if their own financial future is not entirely certain.
Choosing a bequest means the asset will pass through your estate, a process overseen by the New York Surrogate’s Court. While a properly executed will makes this process straightforward, it is a formal legal proceeding. A gift, by contrast, happens privately between you and the recipient.
The Tax Equation: A Critical Distinction
Financially, the tax rules for gifts and bequests are starkly different. This is where prudent planning moves from the conceptual to the concrete.
When you make a gift, you must be aware of the federal gift tax. In 2024, you can give up to $18,000 to any individual in a single year without tax consequences or paperwork. A married couple can combine their exclusions and give $36,000. Gifts above this amount begin to reduce your lifetime gift and estate tax exemption. This strategy is often used to systematically reduce the size of a taxable estate over many years.
Bequests operate differently. They are not subject to gift tax. Instead, the value of the bequest is included in your gross estate, which is then subject to federal and New York State estate taxes if it exceeds the exemption thresholds. A key advantage of a bequest, particularly for appreciated assets like stock portfolios or real estate, is the “step-up in basis.” The asset’s cost basis is reset to its fair market value at the time of your death. This can eliminate significant capital gains tax for your heirs if they decide to sell the inherited asset. A lifetime gift of that same asset would carry over your original cost basis, potentially leaving your beneficiary with a large tax bill.
Execution and Legal Formalities
The legal mechanics of these two transfers are also distinct. A gift is simple—you hand over the check or sign over the deed. Aside from filing a gift tax return for amounts over the annual exclusion, the legal formalities are minimal.
A bequest is part of a larger legal instrument—your will. For a bequest to be valid, the will itself must be valid. In New York, this requires formal execution and submission to the Surrogate’s Court for probate after death. The entire process for admitting a will to probate is governed by the Surrogate’s Court Procedure Act (SCPA). For instance, SCPA Article 14 outlines the precise steps for proving the validity of a will, from petitioning the court to notifying interested parties.
This formal process provides certainty and a clear chain of title for the asset, but it is not immediate. The administration of an estate takes time. A gift provides immediate benefit; a bequest requires the beneficiary to wait until the estate administration is complete.
Ultimately, the choice is not about which is “better,” but which is right for your specific goals, your financial situation, and your family’s needs. It is a decision that weighs the joy of giving now against the duty of prudent stewardship for the future.
The first step in making this decision is to gain a clear picture of your assets and intentions. If you are considering a significant transfer to a family member, I invite you to schedule a legacy planning session where we can review your balance sheet against your long-term family goals.
