Legal Question in Business Law in California

Re: What are the legal outlines to fundraise for a person in need?

I strongly recommend that you do not do this. Your heart is in the right place, but you would be opening yourself up to potential lawsuits and tax liability. Before you could even consider doing this you would have to set up a non-profit organization and that would cost you way more than would probably be donated to this person. I know that is not what you want to hear, but it is the truth.

What I would recommend you do is contact the salvation army or other large non-profit organization such as the church this person attends. They already have everything set up legally and tax wise for this type of thing. The Salvation Army especially does things like this all the time and they know how to do it. The afflicted person's church is also a good idea since they are known.

I want to reinterate that if you try to do this on your own by starting a non-profit and opening a trust account you are opening yourself up to a full audit by the IRS and a potential lawsuit from every single person who donates money. Setting up a non-profit is worse than setting up a company since you would have to account for every single penny you received and then where, why and how it was spent. Just don't do it. Contact the Salvation Army or a non-profit that is specific to your friends illness and ask them if they can set something up.

Good luck.

John Hayes, Esq.

Re: What are the legal outlines to fundraise for a person in need?

Gifts of the kind you're proposing are generally not taxable to the recipient. However, persons making the gifts cannot deduct them as charitable donations. Furthermore, a gift tax applies to the donor unless the amounts are paid directly to a provider of medical care.

Therefore, the preferred process is for the donations to go to a special account, from which payments would be made directly to the doctors, hospital, hospice, etc.

You incur some possibility of personal legal problems if anyone were to accuse you, rightfully or wrongfully, of mishandling the funds. You become a trustee (whether or not there is a formal trust established) and incur all the attendant duties.

If the sums involved are likely to be large -- say over a few thousand -- obtain local legal assistance and also ask a bank officer about setting up the proper type of account.