Fund raising questions for helping an injured friend (Vanity)

me | 9/11/07 | me

[the_devils_advocate_666]

Last weekend a friend was seriously injured in a bicycling accident. A large group of friends are now in the process of creating a fund raising event to support his family and offset some of the ensuing medical bills.

I was looking for assistance in the best way to set up accounts for donations. The way I see it we have three options:

1. Have checks written and sent directly to his family.
2. Create a new account at the family's bank and have the checks written to that account and sent to the bank.
3. Create a new account at the local non-profit cycling club's bank and have the checks written to that account and sent to the bank.

Right now we are leaning toward option one but I'm curious if this could potentially cause more problems for the family with the IRS type folks in the long run. Sharing any knowledge would be appreciated.

[the_devils_advocate_666]

I tried searching the Internet for help on the subject but wasn't able to find relevant information. Thanks in advance for any help.

[1rudeboy]

I think (but don’t quote me) that the only way to keep the IRS off your back is to set up some sort of a trust, and even then I suspect that any income over a certain amount is taxable.

[MeanWestTexan]

I would think it would only be a problem for the family, tax-wise, if any individual donation was over $25,000 -— and, actually, the giver would pay that.

May be similar issues if there is a trust.

[Abathar]

Don’t forget to set up a Paypal account also. It works real well for people who want to just transfer the money while sitting at their computer, not having to write the check and mail it in. The easier you make it, the more people will help out.

[the_devils_advocate_666]

It is nothing life threatening but the wife was recently laid off and the husband will be out of work for at least a few weeks. They don’t have a lot of resources but some medical insurance will kick in after a thousand or so in deductible. So we’re just trying to raise a few thousand to see them through. Setting up a trust is probably more than is necessary I would think. And since it isn’t a huge amount of money maybe my fears are unwarranted and just giving them the money directly is fine. But I’m no tax attorney...

[the_devils_advocate_666]

Is it possible to set up a third party as the recipient of deposits to a paypal account?

[1rudeboy]

IRS Pub. 950, Introduction to Estate and Gift Taxes. (.pdf file)

[Abathar]

I am not an expert on Paypal, but I believe all they need is a checking account routing number and permission to electronically deposit, withdraw from it.

I don’t think they care who you give permission to use it after it is set up, if they are trustworthy or not is your call. The most the owner of the account would have to do is agree to it is all I beleive.

[1rudeboy]

IRS Tax Tip 2007-39, Gift Taxes.

[scidad]

If your friend has a spinal cord injury, then here is where you should go.

National Transplant Assistance Fund, Catastrophic Injury Program.

I registered on FR (long time lurker - sorry!) so I can send you this information, so forgive me if I dont format the link properly... here it is

http://www.transplantfund.org/Catastrophic/index.cfm

They accept tax deductible contributions (people sending in the funds get the tax break) - they also qualify for company matching funds - it is all legit. They hold the funds in a special account. Your friend can send in expenses related to non-covered medical expenses and they will send him a check - only up to the amount of money that has been raised minus a very small administrative fee.

Hope this helps.

[the_devils_advocate_666]

I think that answered my questions. Basically, as I understand it, the gift receiver is free and clear. If a gift giver gives over $12,000 then they (the gift giver) may have tax consequences to deal with. Thanks for your help!