Ask the Expert: Giving to your kids

We're in our 80s. We'd like to give our six adult children $10,000 each. We're not sure how to do this without paying taxes on the gift. Will they have to pay any taxes on it? We have $107,000 in joint savings, a $62,000 annuity, and respective savings of $78,000 and $5,000.

You can't afford to make such a generous gift, even if you own your house and have income from two pensions as well as Social Security.

First, let's answer your question. Gifts are never taxable to recipients; if there's a gift tax, it's paid by the donor. However, each individual can give $13,000 a year to an unlimited number of recipients with no tax consequences. Together, you and your wife could give each child $26,000 a year, tax free.

The problem. You're proposing to give away almost 25 percent of your savings. This money is your protection against unforeseen expenses, from replacing your washing machine or the roof on your house to paying substantial unanticipated medical bills. Bear in mind that there's an excellent chance you'll live into your 90s or even longer.

The average life expectancy for an 85-year-old man is now 5.65 years; for an 85-year-old woman, it's 6.77 years. But 50 percent of Americans live longer than average, and some live much longer! Even if your health remains good, you'll incur new expenses -- for daily help, or to install a stair lift -- to ensure your continuing comfort and safety in your own home. Your kids will want you to have those amenities; and their own financial lives will be easier if you can afford to pay for them.

The bottom line. Your financial independence is a blessing to you and to your children. Don't give away more than you can truly afford.

Websites with more information
Click here to read more at 1.usa.gov/r6KnPe

Click here to read more on  my blog, Family Finance.