Be Careful When Crowdfunding for Medical Expenses
by: Begley Law Group
by Marianne Johnston, Esq. Begley Law Group
Medical crowd-funding is a popular vehicle for individuals to reduce the burden of medical expenses and pay for healthcare costs. GoFundMe, the biggest platform for medical crowdfunding raised $5.0 billion between 2010 and 2018. This sounds great, but, unfortunately, if the crowd-funding beneficiary receives means-tested public benefits, a successful fundraising campaign can result in a loss of these benefits. Many government benefit programs have income and asset limits. For example, an individual on Medicaid or SSI cannot have more than $2,000 in assets. If the beneficiary of crowdfunding receives more than this amount, the individual will be over-resourced and will lose benefits.
There are several alternatives the beneficiary of crowdfunding may take:
- Keep the money and forego the benefits – If a crowd-funding campaign is wildly successful, the beneficiary should weigh the cost of replacing the benefits received and the amount of money raised.
- Spend the money in the month received.If a modest amount is raised in the fundraiser, the individual may be able to spend all the money in the month received. There would be an overpayment for that month, but if the money is spent before the first day of the next calendar month, benefits would not be lost.
- Open an ABLE account.If the beneficiary of the crowd-sourcing campaign is an individual with disabilities that began before age 26, the individual may be able to use the funds to establish an ABLE account. The maximum contribution in any one calendar year is the amount of the federal gift tax annual exclusion, which for 2023 is $17,000. The funds in an ABLE account, up to $100,000 are not counted by Medicaid or SSI.
- Establish a Special Needs Trust.A Special Needs Trust (“SNT”) will protect the individual’s public benefits because assets in the SNT are not considered a countable resource. There are several types of SNT to evaluate. If the money from the crowdfunding is payable to someone other than the individual with disabilities, such as the parents, the parents can establish a Third-Party Special Needs Trust and deposit the amount raised into that Trust. These trusts are rather flexible to administer and do not require a Medicaid payback on death of the beneficiary. If the beneficiary is establishing their own crowdfunding account and is under the age of 65, the individual could establish a first party SNT. If the amount raised is relatively small, i.e., $150,000 or less, consideration should be given to depositing the money in a Pooled Trust administered by a non-profit disability organization. If the amount exceeds $150,000, the money should be deposited in a standalone Special Needs Trust administered by a professional trustee. Upon the beneficiary’s death, funds remaining in a first party or pooled SNT, as well as an ABLE account, are subject to claims by Medicaid for benefits provided.
Before launching a crowd-funding campaign for an individual’s medical expenses, the creator must learn if the planned beneficiary is receiving or has applied for needs-based benefits and understand the ramifications thereof.