Expenses for people with special needs can be overwhelming. Whether those expenses are related to medical care, adaptive devices and equipment, home or vehicle modifications, or basic living expenses, family resources and public benefits are not always enough to meet all those needs. In recent years, crowdfunding, or raising small amounts of money from numerous community members, usually online, has emerged as a common source of fundraising for all types of situations. Platforms like GoFundMe, Kickstarter, and Fundrazr are popular crowdfunding sites that help individuals or families raise funds for various purposes.
The Perils of Crowdfunding to Benefit a Person with Special Needs
However, families of individuals with special needs should be cautious about using crowdfunding to cover their expenses. Crowdfunding can make individuals with special needs ineligible for means-tested public benefits programs such as Medicaid and Supplemental Security Income (SSI). These programs have strict income and asset limits, and any proceeds from crowdfunding would generally be considered countable income or a countable asset that could adversely affect eligibility. Even if the money raised through crowdfunding is earmarked for a specific medical expense or accessibility need, depositing those funds directly into the bank account belonging to a person with special needs can be problematic.
Special Needs Trusts
Some strategies may exist to protect the individual’s eligibility for public benefits programs, even if they can raise funds through crowdfunding. For instance, placing the proceeds of crowdfunding in a special needs trust (SNT) may safeguard eligibility for public benefits. Funds in an SNT generally do not count toward SSI or Medicaid asset limits, provided the SNT is properly established. A special needs planning attorney can help ensure that an SNT is properly established and funded.
Working with Nonprofit Organizations
Working with a nonprofit organization that manages funds in these situations may be another way to raise funds to cover essential expenses while not jeopardizing public benefits. Some nonprofit organizations operate pooled SNTs that accept smaller contributions than might be required to fund an individual SNT. The nonprofit organization then manages the funds from all participants. This arrangement can also preserve eligibility for means-tested public benefits programs.
Aside from a pooled SNT, some nonprofit crowdfunding platforms, like Help Hope Live, will manage any funds raised and directly pay vendors for approved expenses, rather than giving the funds directly to the individual. This strategy may prevent funds from being counted as assets or income for the person with special needs, which might otherwise disqualify them from certain benefits programs.
Achieving a Better Life Experience (ABLE) Accounts
ABLE accounts are tax-advantaged savings accounts for people with special needs. As long as the balance of an ABLE account remains under a certain limit, the balance in that account will not adversely affect eligibility for means-tested public benefits programs.
Frequently Asked Questions
Can friends or family set up a crowdfunding campaign on behalf of a person with special needs?
Yes, but it must be done carefully. Even when someone else creates the campaign, the funds raised may still be treated as income or assets of the individual with special needs if the funds are given directly to them. To avoid jeopardizing benefits, families should plan where the funds will be deposited—such as a properly structured SNT—before launching the campaign.
How can families communicate fundraising needs without creating legal or financial problems?
Families can still share their story and request support, but they should avoid language suggesting that donations will go directly to the individual. Instead, they can explain that contributions will be directed to a trust, nonprofit program, or other protected mechanism that ensures continued eligibility for benefits. Clear messaging helps supporters understand why funds cannot be given outright to the beneficiary.
Are there tax considerations when crowdfunding for someone with special needs?
Crowdfunding proceeds are generally considered gifts from donors and are typically not taxable to the recipient. However, tax issues can arise depending on how the funds are handled, who controls them, and whether they are placed into a trust. Trustees and families should consult a tax professional to ensure that contributions are managed in a way that avoids unintended tax consequences and aligns with the beneficiary’s long‑term financial plan.
Contact Us Today to Learn More About Our Legal Services
Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.
Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.