The website of Generosity, a platform for "socially conscious fundraising" owned by Indiegogo, states that donors should contact campaign organizers to determine if donations are tax deductible. The website advertises campaigns that claim to benefit registered nonprofits alongside campaigns that make no such claims.
Donations can even create unintended headaches for recipients.
If a beneficiary receives means-tested government benefits such as Medicaid or Supplemental Security Income, then receiving a large cash inflow from a crowdfunding campaign could cause him or her to lose government benefits, said Jonathan Blattmachr, a principal at Pioneer Wealth Partners in New York and director of estate planning for Peak Trust Company. That could mean that, for example, funds from crowdfunding pay for medical expenses that Medicaid would otherwise have covered.
"You might think you're helping the recipient, but you're actually hurting her," Blattmachr said.
Raising funds on behalf of a supplemental or special needs trust, for individuals seeking help with medical bills, would circumvent the problem, Shenkman said.
Perhaps the biggest problem for donors, however, is the difficulty in evaluating whether funds will actually be used for the purposes described in a crowdfunding campaign's pitch.
GoFundMe, Indiegogo's Generosity and YouCaring all have procedures in place to guard against misuse of their platforms, according to spokespersons for each of the companies. But it's impossible for crowdfunding companies to thoroughly vet every organizer and recipient who uses their platforms, said Daniel Borochoff, founder of CharityWatch.