Crowdfunding and special needs seem to go hand-in-hand. Caring for a child with special needs is expensive – very, very expensive. Government programs help, but it’s often just a drop in a great big bucket. So it’s understandable that many parents and loved ones turn to crowdfunding websites, such as GoFundMe, to try to raise money to pay the bills or purchase some needed equipment. If the disabled person and her family is not receiving any kind of means-tested government benefits, such as SSI, Medicaid, food stamps, or Section 8 housing, crowdfunding may be a blessing. But if those government benefits are involved, crowdfunding can present a real problem.
Currently the SSA (Social Security Administration) has no rules about crowdfunding specifically. But income and asset limits still apply. So, if a person receiving means-tested benefits such as SSI or Medicaid sets up a crowdfunding account and the proceeds go directly to him or to pay a medical bill, tuition, etc. for his specific benefit, the assets would be attributed to him and he’d be disqualified for a period of time. If a parent (or sibling, etc.) set up the account and the proceeds went to her or some made-up name such as “Gary’s Gang,” the assets would be attributed to the parent and – depending on the details of the crowdfunding campaign – there may be tax issues. The IRS and the SSA uses something called “the name on the check” rule to determine who received the money.
Also, gifts made to specific people are NOT tax-deductible – contrary to what many crowdfunding donors are led to believe. Telling donors that a contribution is tax-deductible when it’s not could be considered fraud.
How to avoid these problems? Set up a special needs trust (SNT) before doing any crowdfunding and make sure all donations are made payable directly to the SNT. However, intelligent donors will likely want to know what will happen to their money when the disabled person dies – many may not want their money going to the government or to non-disabled family members and that could limit your success.
Crowdfunding and preserving means-tested government benefits don’t play nicely together – proceed with extreme caution.
To find out whether a special needs trust is right for your family, give Cindy Clark a call at 941-444-5958 to schedule a consultation.
Other articles you might find interesting: