Liz Weston: Thinking of gifting cash this holiday? You can give up to $18,000 without notifying IRS

To Liz, please: I am a 95-year-old widow. This year, I would like to gift $5,000 to each of my three children, all of whom are in their 60s. Who is responsible for paying the taxes?

Answer: Only persons who have donated millions of dollars over their lifetimes are required to pay taxes; gifts are not taxable to the beneficiaries.

Let’s begin with the fundamentals. Giving someone more than the yearly exemption limit, which in 2024 is $18,000, is the sole time you need to file a gift tax return, which tells the IRS of your generosity. In order to avoid telling the IRS, you may send your children $54,000 before the year ends.

Until the sums you donate beyond that annual cap surpass your lifetime gift and estate cap, which is presently $13.61 million, you would not genuinely be required to pay taxes on your gifts.

Usually, a taxable gift is subtracted from the amount that, at your death, is exempt from inheritance taxes. However, you should have an estate planning lawyer who can give you advice on what to do if you have enough money to worry about it.

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To Liz, please:How is it possible for elderly persons who have never made a Social Security contribution to receive a check? The grandmother of my wife received almost $1,000 each month.

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In response, spousal and survivor payments have existed for almost as long as Social Security.

In 1935, Social Security became a law. Benefits were first restricted to retired employees. Benefits for dependent children, widows, and spouses were established in 1939. Subsequent amendments expanded disability benefits to include spouse and survivor benefits for men.

Social Security is not a retirement fund that employees contribute to on their own. Rather, it is a social insurance policy that is intended to give workers who become disabled, pensioners, and the families of those who pass away income. Taxes earned from existing employees are used to pay benefits. The scheme, like other insurance, is intended to shield individuals from major financial hazards including outliving their savings, losing their source of income, or losing a breadwinner.

To put it another way, your wife’s grandma might not have contributed to the system, but she did receive a tiny income from her spouse or ex-spouse.

Liz Weston, a Certified Financial Planner, writes a column for NerdWallet about personal finance.She can be contacted by phone at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or via the atasklizweston.com contact form.

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