Crowdfunded and Coffin-Bound: The Posthumous Fate of GoFundMe Campaigns

           The call comes in: a woman on the end of the line, is three days into her grief and two weeks into a crowdfunding campaign that has raised more money than anybody thought it would. The campaign was for a person who has died. The money is still sitting in the account. The woman on the end of the phone does not know what to do, her siblings do not know what to do, the funeral home is sending her pointed emails, and she needs help.

             I have had some version of this conversation a half dozen times in the last few years. Crowdfunding blew up faster than the law around it, and every time somebody clicks “donate” on a GoFundMe they are stepping into a legal transaction that nobody; not the donor, organizer, or even the beneficiary, fully understands. GoFundMe has processed more than $40 billion since its launch, much of it earmarked for medical expenses, funeral costs, or the tragically familiar: Aunt Dottie was just diagnosed with something terrible and we need your help.

            When the beneficiary dies, all of those misunderstandings meet reality.

The Scenario, and Why You’ve Probably Seen It

            Somebody gets sick. Somebody gets into an accident. Somebody is dealing with an insurmountable amount of life crises all at once. A friend or relative with the best of intentions, but not necessarily the best judgment, starts a GoFundMe. Donations come in. Some from strangers. Some from relatives who didn’t know Dottie needed help until they saw the link in their feed.

            Then Dottie dies.

            Now there is $25,000 sitting in a PayPal-linked account, and thirty-two nieces and nephews, aunts, cousins, church friends, and one shifty ex-husband all want to know what happens next. The organizer, a best friend and do-gooder, thinks she should keep it “for the family.” Dottie’s adult children think it should go directly to them. The funeral home has been calling. The hospital won’t stop calling. And somebody, somewhere, is about to do something unintentionally illegal while having the purest of intentions. This is where the attorney in me starts yelling “STOP.”

First Thing: It Was Never Dottie’s Money to Begin With

            This is the part no one believes; the money in a typical crowdfunding campaign does not, as a legal matter, belong to the person it was raised for. It belongs to the organizer. Donations flow into the organizer’s account, and the organizer has a contractual duty to pass them on to the beneficiary for the stated purpose.

            GoFundMe’s terms expressly provide that donations are transferred to the campaign organizer, who is then contractually obligated to deliver those funds to the beneficiary for the stated purpose. Similar structures apply on most other platforms.

            So, if Dottie never received the money before she passed, it is not, strictly speaking, an asset of her estate. It is property held by her best friend, under a contractual obligation to Dottie and now Dottie is no longer around to enforce the contract.

The Implied Trust, Or, Why the Best Friend Is Not Off the Hook

             The do-gooder best friend legally holds the funds. That does not make the funds her funds. When you solicit money for a stated purpose, you become a fiduciary. You are holding the money in a constructive or resulting trust, for a specific beneficial purpose. Courts around the country, when presented with the question, predominantly land on the view that a campaign organizer is a trustee either for the beneficiary or for the donors, depending on the facts of the campaign.

             So, the do-gooder best friend cannot keep the money. The best friend also cannot spend it on things that were not part of the original ask. She has a few legitimate options, which we’ll get to, and none of them involve her taking an around-the-world cruise.

Three Scenarios I Have Actually Seen

             The first scenario is what I mentally file under “got paid in time.” Dottie received the money before she died. It was in her checking account, she wrote a few checks against it, the rest of the funds remained in the account when she passed. Whatever is left is an asset of her probate estate, subject to her creditors, distributed under her trust or will if she had one and under intestacy if she didn’t. This is the cleanest scenario, and it is still a mess, because there is almost never enough funds left to accomplish what the donors had in mind.

            The second scenario is “stuck in the pipeline.” Dottie died before the do-gooder best friend transferred the money. It’s just sitting there. Who owns it? In my experience, and in the handful of reported court decisions that discuss the issue, the question depends heavily on how the campaign was worded. If the page said, “help Dottie with her medical bills,” and Dottie doesn’t have medical bills anymore (she has funeral bills, a final hospital bill, and a probate attorney with a retainer), the sensible reading is that the funds belong to her estate. The best friend is a trustee. She must relinquish the funds to Dottie’s estate. If the page said, “help Dottie and her family through this difficult time,” the family may have a direct claim of the funds. And if the page says anything about what happens to remainders. i.e. “any funds not used for treatment will be used for funeral expenses and the care of her children,” that language will almost certainly control, because that is what the donors relied on when they donated the funds.

            The third scenario is the memorial fund. Dottie is already gone when the campaign launches. The page says something like “help the family with funeral costs and the kids’ schooling.” Now the beneficiary of the campaign is not Dottie’s estate at all. Specific, living individuals are named. The money does not go through probate because it was never Dottie’s. It belongs to the family, for the stated purposes, in the hands of the organizer as trustee. And, to say it again for the people in the back row: the organizer does not own the money and cannot buy a sports car.

About the Sports Car

            I am not joking about the sports car. Look at the news any given year and you will find somebody charged with diverting memorial funds for personal luxury items. The $400,000 “Homeless Hero” Hoax in New Jersey, 2019, wherein a woman was charged with theft by deception after allegedly using a campaign raised for a homeless man who helped a stranded woman to pay for, among other things, a BMW and gambling. August 2021, another New Jersey woman was indicted for creating a GoFundMe campaign to raise money for her husband’s cremation and funeral, then leaving his body in the morgue and using the donations for personal living expenses. Fake Cancer Scam. Nevada 2026, woman pled guilty of theft after faking cancer and spending medical donations on personal bills and presents for her children.

            The law on this is not fuzzy. Misusing crowdfunding money is theft by deception, wire fraud, theft, and money laundering. It is breach of fiduciary duty. On a bad day, when a state AG’s office is looking for a sympathetic-victim case, it is a felony. I have sat across the table from good people, genuinely good people, who gave to their church and volunteered at their kid’s school, who ended up with a criminal docket number because they told themselves they were just borrowing against a memorial fund. One of them thought she would pay it back when her tax refund came. She did not get the chance.

What the Organizer Actually Should Do

            The law is not a trap. There are things an organizer can legitimately do with remaining crowdfunding funds after a beneficiary dies. Final medical bills, funeral costs, outstanding hospice expenses, other items closely tied to the original ask, those are almost always defensible. Refunding donors is defensible, and every major platform has a mechanism for it. Very few donors will ask for their money back, but offering matters, both ethically and legally. Redirecting to a related charity is usually defensible if the page contemplated it. Turning the remainder over to the decedent’s estate is almost always the safest path, even if it means the money gets eaten by creditors. And in certain cases, with clear donor intent and careful documentation, distributing directly to family members the decedent would have wanted supported is a perfectly reasonable move.

            Documentation is the word that matters there. Save the original campaign page as a PDF. Save the donor comments. Keep the account separate. Keep receipts. If you think a donor might be surprised at how a given dollar got spent, assume a prosecutor would be surprised too, and reroute accordingly.

The Tax Mess Nobody Warns You About

            I hate writing about taxes because it puts people to sleep, but this is the one that bites my clients the hardest. When crowdfunding money runs through a platform, the platform may issue a Form 1099-K to the organizer, because the organizer’s name is on the payment account. The IRS computer then concludes that the organizer has received income. The IRS’s actual position, per Information Letter 2016-0036 and a handful of follow-ups, is that crowdfunding gifts are generally not taxable income to the beneficiary. That is great. It does not help you at all when the 1099-K shows up and the IRS wants an explanation.

            So: keep the money in a separate account, keep the records clean, get a CPA, and do not file your own taxes the year you run a campaign. I am not kidding about that last one. I have seen too many April 14th phone calls.

The Advice I Wish More People Took

            If you are ill, or if you are the person standing up a campaign for someone who is, do three things before the first donation hits.

            Write the campaign description clearly and state what happens to any remaining funds. One sentence “any funds not used for Dottie’s treatment will be used for her funeral expenses and the care of her children”, prevents a year of litigation and thousands of dollars in legal fees.

            Second, if the beneficiary is on Medicaid, SSI, or any other means-tested benefit, call an estate attorney before the money arrives. A sudden chunk of cash can disqualify someone overnight, and the fix (a special or supplemental needs trust) must be in place before the funds hit an account in the beneficiary’s name. I have cleaned up a lot of those after the fact. It is not fun and it is not cheap.

            Third, if the campaign is likely to raise real money, look into running it through a 501(c)(3) fiscal sponsor. It is more paperwork on the front end and much less paperwork on the back end, and the donors get a tax deduction they would not otherwise have.

The Point

            There is a version of this story where people tell themselves that it all works out. The campaign raises more than the bills, the bills get paid, whatever is left quietly finds its way into the right pocket, and nobody ever asks any awkward questions. It is a tidy little story. I have not once, watched it actually play out that way.

            In the real world, the money is already spoken for. The heirs want their share. The creditors want theirs. The IRS wants its slice. The AG wants to know why a grieving widow is suddenly driving a cherry red corvette. And the organizer, who started out doing the right thing, ends up sitting across from an attorney trying to work out how to unwind a mess that began with the very best of intentions.

            Call somebody before it gets to that point. Call somebody after, if you must. But call. These funds are not a windfall. They are a trust, in both senses of the word, and in my experience the people who remember that sleep a lot better than the ones who don’t.

 

Erica Shepard is a trusts and estates attorney licensed in Nevada and California. She has been certified as a specialist in the areas of estate planning, trust and probate law by the California State Bar’s Board of Specialization, and she holds an advanced tax law degree (L.L.M.). She can be reached at shepard@portersimon.com.