dear liz: I am a 95-year-old widow. This year, I would like to give $5,000 to each of my three children who are in their 60s. What is tax? Who pays it?
answer: Gifts are not taxable to the recipient, and the only givers who have to pay taxes are those who give away millions of dollars during their lifetime.
Let's start with the basics. If you give someone more than the annual exemption limit ($18,000 in 2024), you can let the IRS know about your generosity by simply filing a gift tax return. That means you can gift your child $54,000 by the end of the year, or you don't have to. I have to tell the IRS.
You don't actually owe gift taxes until the amount you gift above the annual limit exceeds the lifetime gift and estate limit (currently $13.61 million).
Taxable gifts are usually deducted from the amount that allows you to avoid inheritance tax on death. But if you have enough money to worry about that, you should hire an estate planning attorney to advise you on how to proceed.
Dear Liz: How can seniors who have never contributed to Social Security receive a check? My wife's grandmother earned more than $1,000 a month.
answer: Spousal and survivor benefits are almost as old as the Social Security program itself.
Social Security was signed into law in 1935. Initially, benefits applied only to retired workers. In 1939, allowances for wives, widows and dependent children were added. Subsequent changes added spousal benefits, survivor benefits, and disability benefits for men.
Social Security is not a retirement benefit where workers deposit funds into their personal accounts. Instead, it is a social insurance program designed to provide income to retired workers, disabled workers, and the families of deceased workers. Benefits are paid using taxes collected from current workers. Like other insurance, this system is designed to protect people from serious financial risks, such as outliving their savings, losing their ability to earn an income, or losing their breadwinner.
In other words, your wife's grandmother may not have paid into the scheme, but her spouse or ex-spouse did, so it became her small source of income.
Liz Weston, Certified Financial Planner, is a personal finance columnist. Nerd wallet. Questions can be directed to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or by using the “Contact” form below. askrizweston.com.
