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My wife's mother (the "patient", for ease of writing this) has early onset Alzheimer's. The family has spent all of the patient's personal cash paying for medical expenses, and is now asking relatives and friends to contribute for her ongoing care.

I wanted to setup a website to allow friends and family to donate using a credit card or their bank account. Originally, I was planning on receiving all of the funds in my own account, and then cutting a check or transferring money to the patient's primary caretaker, her brother.

Is this OK to do for accounting/tax purposes? Or should I setup a new account using the patient's SSN, having the brother us his power of attorney?

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With taxes, knowing what tax law you're talking about is generally required to properly answer questions. I'm guessing you're talking about the US Federal tax law, please correct me if I'm wrong. –  littleadv Dec 1 '12 at 0:54
    
That is correct –  Kirk Dec 1 '12 at 1:09
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2 Answers 2

Generally paying ones medical bills (directly) is exempt from gift tax. So for large amounts (medicine? Hospitalizations? Labs? etc), you can ask the family to just pay the bill to be on the safe side.

Otherwise, I'd say it would be the best to set up an account in the name of your mother-in-law, and deposit all the donations (aka gifts) there, making sure that every donor is below the gift tax exemption ($13K this year). Then the brother can use it for the caregiving based on the POA.

You should talk to a lawyer and a tax adviser about more complex issues (for example, how to ensure that the donated money is used according to the declared purpose?).

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I think the entire answer is: You should talk to a elder care lawyer and a tax adviser about these issues.

The tax and legal issues can be major for the patient, the OP, and the contributors. You need to know how these options impact existing insurance and government programs. Do this before setting up any donation system.

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+1 - I was about to offer an answer similar to littleadv, but he covered it well. You are right to steer them this way. It's kind for people to offer this help to a friend/relative, but there may be other avenues as you suggest. Excellent points made here. –  JoeTaxpayer Dec 1 '12 at 19:10
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