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Paying for Funeral and Cremation Services: Crowdfunding Pitfalls to Be Aware of

When a loved one passes, the financial burden of carrying out their last wishes can often be overwhelming. Many funeral homes and crematoriums provide opportunities for pre-payment when possible, as well as offering flexible payment options to assist your family during this difficult time.

Crowdfunding, for example, has become a popular source of fundraising in recent years. There are a variety of crowdfunding services available to help facilitate your personal fundraising efforts, such as GoFundMe.com, YouCaring.comcrowdrise.comTreasured Memories Funding and indiegogo.com, to name a few. However, if you’re considering using a crowdfunding service to fund a funeral, cremation, or any related services, there are a few important things to be aware of. Before you set up an account, be sure to read all of the rules, mandatory processing fees, timelines for receiving payment, and other fine print, to avoid any unnecessary surprises.

Added Fees

While some crowdfunding providers offer no-fee crowdfunding, others charge a variety of fees, in addition to fees that may be charged by credit card companies and other payment processing services, such as Paypal. Be sure to look into the details of associated fees, as they can be quite complex, depending on the type of campaign you are running.

For example, Indiegogo charges a 5% platform fee, plus .30 + 3 – 5% payment processing fees per donation, depending on the third party processor used. In addition, any campaigns with bank accounts outside the US, will also incur a $25 bank transfer fee. Indiegogo also offers another platform, generosity, which offers a free fundraising platform for non-profits and a variety of social causes. Payment processing fees, however, still apply. GoFundMe also charges a 5% fee per donation, plus .30 + 2.9% processing fee, for a total of 7.9% per donation.

Time to Process Payment

It’s also important to consider the time it will take for a payment to be processed. Each crowdfunding site may have different policies on releasing funds, so it’s important to know the timeframe before setting up an account.

Generosity by Indiegogo, for example, disburses funds every three weeks, with your first disbursement arriving about 30 days after your fundraiser starts, and following disbursements arriving every three weeks after that. Any funds left over after your fundraiser ends are sent within 15 business days. If this case, you would need to ensure that your account was set up with a goal deadline well before any services could be scheduled. Otherwise, your funds could be held up well past the date of the scheduled funeral/ burial/ cremation/ memorial service.

GoFundMe, on the other hand, allows users to request withdrawals at any time, and administrators will receive payment anywhere between five and seven business days. Payments are made via electronic bank transfers or paper checks, depending on your preference.

If someone besides the financially responsible person started the campaign, you should also account for the time it will take to transfer funds either to you, or to the funeral home directly, after you receive them from the platform.

Government Assistance

The popularity of crowdfunding has increased significantly, and, unfortunately, many people who receive financial assistance from the government have seen their benefits negatively affected. If you or your family members receive financial assistance from the government, it is wise to seek advice from a professional before utilizing crowdfunding services. A successful campaign for a loved one may result in the loss of benefits, regardless of who started the campaign.

Tax Implications

The topic of tax implications with regards to crowdfunding appears to be anything but clear. According to GoFundMe, “Most donations on GoFundMe are simply considered to be ‘personal gifts’ which are not taxed as income in the US. Additionally, only donations made to a legally registered non-profit or charity may be considered eligible for donors to claim as a tax deduction. Again, every situation is different so please consult with a tax professional in your area.” We agree that checking with a tax professional before setting up an account is in your best interest.

Please request our pre-planning brochure to get the best advice and pricing on your end-of-life selections.

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