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Did You Know…?

September 25, 2018 | Weekly Commentary

by Mae Gerhart, Tax / Financial Planning Professional
Investment and charity scams occur often after a natural disaster. In the aftermath of Hurricane Florence, it is important that well-meaning individuals looking to support the relief effort do some due diligence. Before you make an investment or charitable contribution, you should verify that the opportunity is legitimate and that your money is going to have the desired result.

FINRA provided a warning last week with some details about how to avoid investment scams promising huge gains around stocks associated with clean-up, rebuilding, and breakthroughs in science and technology that purport to address current and future flood-related issues. They may pressure you to invest and reaching out to you directly. Do your research even if they have a familiar sounding or respectable name. Read the alert here.

Charity scams follow similar tactics and tend to stick around longer. In these cases, the money you may intend to benefit the charitable cause, can end up being used for other purposes. In 2012, a watchdog group found that one charity failed to spend $56 million it had raised on actual services and instead spent nearly all of it on marketing costs.

Sites like GoFundMe or YouCaring provide crowdfunding for various causes, many of which are not registered charities. These sites also collect fees from a percentage of your contributions – sometimes upward of 10% or more – to support their business model.

By researching various charities through charity rating sites such as give.org, charitywatch.org, or guidestar.org, you will be able to look at individual charity’s most recent reports and ratings. These sites can show you how much of your actual contribution will go towards the end goal versus how much will be used for administration expenses.

Finally, keep in mind, that due to the Tax Cuts and Jobs Act of 2017, not everyone will receive a tax benefit from making a charitable donation. Advance tax planning with your financial advisor will help you figure out if the donations you desire to give also aligns with your financial plans.

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