When I first heard about the notion of crowdfunding it seemed quite a fantastical idea. The original premise of crowdfunding was hatched within the incubator of entrepreneurship and raising capital for small business ventures. Its extension into the fund-raising arena for other causes was, I guess, a natural evolution. We are all familiar with the notion of charity and it is inherent in most of us to feel empathy for a worthy cause and step up to the plate to help those in need.
Historically if a family could not pay for a funeral they would have reached out to their local community and sought some charitable help to meet the costs of the funeral home. With a breakdown in communities and 76% of Americans existing pay-check to pay-check, the level of charitable community support just isn’t what it used to be.
So it seems that people have turned to the great platform of the Internet and utilized our transferred online community culture AKA social media and aside from crowdfunding platforms that cover a range of campaigns to raise funds, there are also dedicated funeral crowdfunding websites.
Why crowdfund a funeral?
If you have no funds to cover the cost of a funeral it can be extremely distressing! There is very limited financial aid to assist low-income families to pay for funeral expenses, and an unexpected death can catapult a family into a situation of suddenly needing to access several thousand dollars. Not many of us just have a few thousand dollars sitting around in a bank account these days, or even hidden under the mattress. A good percentage of us are juggling credit cards and bill payments and extending a level of credit is either not available, or institutions are just very reticent about extending credit to pay for a funeral.
Setting up a crowdfunding campaign for a funeral can assist in raising all, or at least some, of the costs required. A full funeral service can amount to $10,000 but a simple cremation funeral can be completed for between $600 and $2,000. Raising a few hundred, or a couple of thousand, dollars using a crowdfunding platform can enable a family to meet the cost of a simple and dignified send-off.
How do you crowdfund a funeral?
There are several crowdfunding websites. Some are for a variety of fund-raising purposes such as GoFundMe, GiveForward, and Donationto, but there are also dedicated funeral fund-raising websites such as FuneralFund and GracefulGoodbye. To set up a funeral fund-raising campaign you need to register with a crowdfunding site and complete the fund request information to begin a campaign. You set a length of time for your campaign to run and a campaign $ target. You can share your fund-raising campaign via your social media networks and hope to see some funds get donated.
The issue with crowdfunding a funeral is most likely to be the time-scale. Donation campaigns often run for 30 days but funds to pay for a funeral can be required within days.
What is the cost to crowdfund a funeral?
The commissions that a crowdfunding platform takes vary depending upon the site you use. There is no upfront fee to set up a campaign but instead, a fee is taken from each donation received. For example, GoFundMe takes 5% from every donation you receive and levy a 3% processing fee for each donation. GracefulGoodbye claims to take 4% on every $1 donated.
What are the legal and tax implications of using a crowdfunding site to make, or receive, donations?
In the main donations made to a crowdfunded funeral are considered a ‘personal gift’ and therefore not taxed as income. Only donations made to a legally registered charity or non-profit organization may be considered tax-exempt and therefore eligible to claim as a tax deduction. If a funeral fund campaign raises more than $20,000 or more than 200 donations are made, the payment processor is required to send the campaign host a 1099-K to ensure the money is reported to the IRS. However, tax experts say that this can get complicated as funeral and related expenses are exempt from taxation anyway.
How long does it take to receive the funds for a crowdfund funeral campaign?
Donations that are made into your campaign can be withdrawn instantly as funds come in. The length of a campaign should run largely depends upon your situation. A funeral home will not proceed with a funeral if you have not provided evidence that you can pay, and a crowdfunded funeral campaign would not instill much faith in a funeral director that payment is guaranteed. Crowdfunding a funeral is most likely an ideal way to recoup some (or all) of the costs paid for a funeral from friends, family, and extended networks.
Does crowdfunding a funeral work?
According to an article by Fox News crowdfunding platform, GoFundMe had more than 22,000 open funeral, tribute and memorial campaigns, which have collectively raised $40 million to date. The average funeral campaign raises about $2,200 with an average individual donation amount of $65. YouCaring has more than 30,000 open funeral-related campaigns at the moment, which have doubled in the past year, with the average campaign raising around $2,000.
This clearly demonstrates that crowdfunding a funeral campaign can work. The message seems to be about being open and honest about your campaign, why the funds are needed and what you intend to do with the funds (especially should there be an excess). Making a funeral fund campaign personal and an active tribute is most likely to elicit support. For example, a recent campaign on YouCaring named the “Rick and Kelly Schwab Memorial Fund” recently raised more than $23,000 to pay for the funerals of a couple killed on their motorcycle by an alleged drunk driver on July 4, leaving their 14-year-old son behind.
Rose Spinelli of CrowdFundamentals claims that the most effective campaigns are those where a sudden or unexpected death has occurred, however, the death of an elderly person does not prompt such an outpouring of empathy and financial support. Most support comes from family, friends and acquaintances and not complete strangers. Another mechanism employed to encourage and honor donors by some campaign hosts is to offer rewards or gifts for those who donate. These may be just small tokens of appreciation based upon a level of contribution, and range from such things as a remembrance card to a hug!
Whilst crowdfunding may not be a solution to immediately deal with funeral costs if you do not have the money for a funeral, an effective crowdfunding campaign (especially if you can quickly share this amongst your networks of contacts) can certainly help to raise funds in many cases.