The Perils of GoFundMe – Part 3

In my blog post last week, I discussed crowd funding sites like GoFundMe.  We see families dealing with a sudden catastrophic illness or injury attempt to use these sites to raise money to pay for medical and other bills.  It rarely is a solution if only because of the amount of money needed and length of time of recovery – if full recovery is even possible.  For most people Medicaid becomes a necessary financial solution.

As I explained last week, Medicaid is a needs based program.  Certain asset and income limitations must be met and the State scrutinizes an applicant’s finances over a five year look back period. Raising money thru GoFundMe and sites like it create two common problems when trying to achieve Medicaid eligibility.

The first is that in order to meet Medicaid’s asset limit one must spend down.  GoFundMe money coming in results in account balances going in the “wrong direction”, increasing rather than declining.  Granted, that money will be spent on medical and other bills as part of the spend down process but strict asset limits must be met and that is difficult when money keeps coming into accounts in differing amounts and at different times.  Secondly, these transfers in must be documented for Medicaid in order to prove that these accounts are not the applicant’s or the applicant’s spouse’s assets.  At the same time the money leaving the applicant’s (and the spouse’s) accounts must be documented to avoid Medicaid penalties.  This can get complicated, depending on how the GoFundMe accounts have been set up.

Sometimes a well meaning sibling, other family member or friend will set up the account.  If that account is in the name of the spouse then we have another asset.  If the account is in someone else’s name, that solves the asset problem but how the funds are distributed can create the transaction problem.  From a Medicaid standpoint it is best that the funds be set up in a third party’s name and distributed directly from that account to pay the bills – not transferred to the applicant or spouse to then pay the bills.

That, however, may create other issues.  For example, companies and other individual donors may be considering donating larger amounts.  They may not want to transfer the funds to a third party without knowing how the funds will be spent by that individual.  

Tax questions also need to be answered.  In some cases designating the fundraising efforts as a “not for profit” charity might be a solution but that’s where things get more complicated and more involved than most families can or are willing to handle.  Tax and legal professionals with expertise in establishing and managing legally recognized charities are needed to guide families thru the process, at a time when the family is already overwhelmed.

While I can certainly understand how tempting it is to use technology to attempt to raise large sums of money in a short period of time, unfortunately in my experience I have not yet seen it to be a solution.  In the best scenarios I have seen families raise tens of thousands of dollars when hundreds of thousands of dollars or more are likely what is needed.  Ultimately, it tends to complicate the more realistic solution which usually ends up to be government benefit programs.