As a cancer patient on supplemental security income, can a crowdsourcing campaign be structured that won’t jeopardize my Medicaid?

by Timothy C. Hilbert, CPA | Feb 13, 2019

As a cancer patient on supplemental security income (SSI), how can a crowdsourcing campaign be structured so as not to jeopardize my Medicaid?

Any crowdfunding that is either established by you for your own behalf or by a third party (friend) that benefits you is counted as support. The law requires it to be reported to both SSI and the state authority administering Medicaid as support. The reason given is that the use of the assets is not restricted to medical expenses, so funds from crowdsourcing could be used for other living needs. That renders crowdfunding of limited or of no use for most, if not all, Medicaid beneficiaries, unless the crowdfunding is sufficiently robust to eliminate the need for Medicaid benefits.

A viable option is to establish a special needs trust. In that case, there is an independent trustee who manages and approves expenditures for the limited use of paying certain medical expenses. A special needs trust does require some additional effort, in that a legal document is required and annual tax returns (federal and state) must be filed. If there are funds accumulated and invested, the trust may have to pay some amount of tax.

To structure, you would first establish the special needs trust, (including obtaining a federal employer identification number) and find a trustee (can be a friend). You can then crowdfund by indicating that you have established the special needs trust, and that funds should be made payable only to the trust, or, if doing any sort of electronic payment, make sure the target account is the special needs trust account.
You should plan to contact an estate and family planning attorney to do the legal work on any special needs trust.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Timothy C. Hilbert, CPA, is retired. He was a director of audit and accounting and the professional services industry group leader with Kreischer Miller in Horsham, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.