Father passed at 90, only had social security, SSI maybe 700 a month, but a few months before passing got what's called a Non service pension, with back pay of about 10k, so I'm the only heir and he wanted me to gift money to grandkids, but I'm not sure what to do unless I know for certain that I can give money to my child. If he never filed a return in years, does he still have to? I always thought that social security benefits weren't taxable, and if I was only beneficiary, do I have to report that as income in my return since its in my possesiion now?

SS benefits MAY be taxable depending on your AGI. You report it on his return for 2014. If you Google "filing taxes for a deceased person", you will find IRS docs. to walk you through. Taxes are paid and the rest comes to you tax free.

The size of the estate is so small that there are NO estate taxes.

If the Social Security back pay is large enough and is received AFTER your father's death, you may need to report it on a fiduciary return, which is essentially an income tax return filed by the estate.

Get professional help for the fiduciary return.