Yes, a trust can generally accept donations from platforms like GoFundMe or other fundraising initiatives, but it’s not always a straightforward process and requires careful consideration to ensure compliance with tax laws and the terms of the trust itself.
What are the Tax Implications of Receiving Funds?
When a trust receives funds from a GoFundMe campaign, those funds are typically considered gifts. The IRS has specific rules regarding gift tax, and while most gifts under a certain annual exclusion amount (currently $18,000 per donor in 2024) are not taxable, larger contributions may trigger gift tax reporting requirements. It’s vital to keep detailed records of all donations, including donor names, addresses, and amounts, to demonstrate compliance. The trust’s tax identification number (EIN) should be used for any reporting. Furthermore, if the trust is a charitable trust, donations may be tax-deductible for the donors, adding another layer of compliance. Approximately 65% of Americans report donating to charitable causes annually, with online giving increasing substantially in recent years, so understanding these implications is more crucial than ever.
How Does This Affect the Trust’s Purpose?
The trust document itself outlines the permissible uses of the trust assets. Accepting funds from a GoFundMe should align with this purpose. For instance, if the trust is established to provide for a child’s education, donations must be used for qualifying educational expenses. If the trust is a charitable trust, donations must be used in furtherance of its charitable mission. It’s imperative that the trustee maintains clear accounting of how funds are allocated to demonstrate responsible stewardship. Deviation from the trust’s stated purpose could lead to legal challenges and potential penalties. Consider the case of old Mr. Abernathy, a local carpenter who established a trust for his granddaughter’s college fund. A well-meaning GoFundMe was created after a local newspaper article highlighting her artistic talents, but because the trust language *specifically* outlined educational expenses—tuition, books, and fees—the funds raised for art supplies required amending the trust, a costly and time-consuming process.
What Steps Should a Trustee Take?
Before accepting any funds from a fundraising platform, the trustee should consult with an attorney and a qualified tax professional. They will need to review the trust document to determine whether accepting such funds is permissible, and they will also need to advise on the tax implications. It’s also prudent to establish a separate bank account specifically for the GoFundMe funds to maintain clear accounting. “Transparency is paramount,” as Steve Bliss often emphasizes, “especially when dealing with funds received from public sources.” The trustee should document all decisions and maintain a meticulous record of all transactions. The trustee should also review the terms and conditions of the fundraising platform. These platforms typically have rules about how funds can be disbursed and may require certain documentation before releasing the funds.
What Happened When Things Went Wrong & How Were They Fixed?
I recall a case involving a family establishing a trust to manage funds for a chronically ill child. A neighbor initiated a GoFundMe campaign to help cover medical expenses, and the funds were deposited directly into the trust’s operating account without consulting the trustee or legal counsel. It quickly became apparent that the trust agreement *didn’t* explicitly authorize the acceptance of outside donations, and the IRS flagged the account for unusual activity. The family panicked, fearing legal repercussions. Thankfully, they sought guidance from Steve Bliss and his team. After a thorough review of the trust document, we worked to amend the trust to specifically include provisions for accepting charitable donations. We prepared a detailed accounting of all funds received and provided the IRS with the necessary documentation to demonstrate compliance. It was a stressful situation, but ultimately, the issue was resolved, highlighting the importance of proactive legal counsel.
Conversely, the Millers, facing similar circumstances, proactively contacted Steve Bliss *before* accepting any funds from a community fundraiser for their son’s specialized therapy. We drafted an amendment to the trust agreement, clarifying the permissible use of funds from outside donations. We established a separate account for the fundraiser proceeds and implemented a clear accounting system. The IRS review was smooth and straightforward, demonstrating the power of preparation and diligent adherence to legal best practices. The Millers were able to focus on their son’s therapy, knowing their financial affairs were in order.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
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Map To Steve Bliss Law in Temecula:
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What should I know about jointly owned property and estate planning?” Or “What are common mistakes people make during probate?” or “How does a trust work for blended families? and even: “Will my wages be garnished during bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.