Caution: Crowdfunding Accounts Can Be Detrimental for Someone on Medicaid and SSI

Over the past couple of years, when on social media, I have seen more and more crowdfunding and personal fundraising efforts. Crowdfunding sites such as GoFundMe and Kickstarter cut out the middleman of fundraising, allowing the person or organization in need to appeal directly to the general public.

In many cases, crowdfunding takes place when a family member or friend has a medical emergency and needs help with paying the bills. Unfortunately, many do not take into account other contributing factors or benefits some people may already be receiving. For example, if a crowdfunding site is established for a person with special needs who is receiving disability or medical benefits, negative repercussions can be seen.

The Social Security Administration (SSA) does not have a fixed policy regarding Social Security Income benefits and crowdfunding sites; however, its treatment of other resources can project the problem of crowdfunding accounts.

Let’s imagine a crowdfunding account that’s created for a young man, Aiden, who is currently receiving Social Security Income and Medicaid. If Aiden created the account for himself, that means he has direct access to the funds in the account. Regardless of whether the crowdfunding page outlines what he can use the money for, it is likely that the funds are going to be counted as a countable resource for Medicaid and Social Security Income (SSI) purposes. Once a donation is made, regardless of whether the intentions are to use the money for medical bills, the beneficiary, in this case, Aiden, can really use the money on whatever he chooses. For that reason, the SSA will most certainly count funds in a crowdsourcing account established by an SSI beneficiary as the beneficiary’s money, as will most state Medicaid agencies.

When dealing with accounts that are set up on someone’s behalf, things can get a little more complicated. Let’s take John, for example. John was critically injured in a motorcycle accident. John’s best friend, Peter, decided to create a crowdfunding account to help pay for John’s hospital bills. In a situation like this, one can argue that the account is not the beneficiary’s resource, provided the Medicaid or SSI beneficiary does not have direct access to the funds. However, since the SSA doesn’t have specific rules pertaining to these accounts, it’s impossible to know if the money in a crowdfunding account will count against a beneficiary even if he cannot access the funds himself.

Instead of creating a crowdfunding account in situations such as the ones outlined above, a better option would be to create a special needs trust to hold the funds to care for a beneficiary. Although creating a special needs trust might require additional work, they are unquestionably exempt from SSI and Medicaid resource restrictions. In some cases, some donors who want to use the convenience of a crowdfunding account with the benefits of a trust have set up a special needs trust first, then make it the beneficiary of the crowdfunding account.

Before setting up an account for a person with disabilities, it is imperative to discuss the matter with a special needs planner.