As more turn to crowdfunding to cover unexpected costs, legal experts urge caution

While crowdfunding can certainly be beneficial for those in need, legal experts say there are also potential risks for well-intentioned donors.

CORAL SPRINGS, Fla. – Jamilah Gordon will never forget the day in the Fall of 2018 that she was told her teenage son, Matthew, had leukemia.

“You don’t know what to think. I just remember I couldn’t stand,” Gordon said.

Ciani Jerez, of Pembroke Pines, was diagnosed with Hodgkin Lymphoma her sophomore year in high school.

“To be diagnosed with cancer at the age of 15, hardly 15, was really, really rough,” Jerez said.

Both Gordon and Jerez decided to join a growing number of Americans who’ve turned to social media and direct fundraising campaigns to help offset out-of-pocket medical expenses.

“I think we’re seeing a growth of this kind of crowdfunding because people aren’t sufficiently covered in our patchwork system and we see people who need to fill in the gaps, No. 1, and we also see people much more aware of how social media can be used,” Nova Southeastern University law professor Kathy Cerminara said.

While crowdfunding can certainly be beneficial for those in need, Cerminara said there are also potential risks for well-intentioned donors.

“There are schemes, people who engage in all kinds of activity to fraudulently make up a person who is ill and to make up facts about a person people do know,” she said.

Those who benefit from crowdfunding can also face the burden of a big tax bill as a result the donations they receive.

“Technically, of course, without any separate foundation, if I give you $100,000, you have $100,000 of income and tax is due,” Cerminara said.

On the plus side, Cerminara said crowdfunding creates a strong sense of community, bringing people in need together with those who want to help.

“People in our community in Coral Springs have been so good with Matthew,” Gordon said. “It’s so important for him getting better to know that everyone is rallying behind him.”

Jerez agreed.

“It definitely is a lot easier now knowing with the fundraising that has gone on that we have some cushion to lean on with my medical expenses,” she said.

Crowdfunding donations can be shielded from taxes if they are put in a legitimate tax-free account and used only for the intended purposes.

About the Authors:

Veteran journalist Kathleen Corso is the special projects producer for Local 10 News.

Louis Aguirre is an Emmy-award winning journalist who anchors weekday newscasts and serves as WPLG Local 10’s Environmental Advocate.