I put this title as a question because unless you've been real good with your chao you do not really know which route your chao is going to take once it hits 5 or 6 years old. When the chao is going to reincarnate, a pink and yellow cacoon will be surrounding it just like when it evolved. Except this time, it's going to be turning into an egg, and on the inside of the egg, it will keep 10% of it's stats, it's current grades, and any animal parts if it had any.
If your chao dies it will have a sad look on it's face (still has a sad face even if it's going to reincarnate), aswell as go into a grey cacoon. Once it dies you will never see the chao again, as dying works the same way saying goodbye via chao transporter does, it is being deleted off your Chao Garden.
Forunately enough, I have with me a few tips and tricks to almost 100% guarantee your chao will be reincarnating rather than dying! If your chao comes to your whistle prior the stage in it's life where it either dies or reincarnates, it should reincarnate. Just another way to play it safe would be to BE in the garden with the character the chao likes most (as in, in the garden with the character the chao that will be reincarnating or dying likes the most while it's preparing to do either). I think I may have been making it sound like it's a 50% percent chance for either death or reincarnation to occur. It's not. It's based on how you've treated your chao, and mostly based on if it comes to your whistle, because that does mean it likes you.