It’s hard to believe that the holiday season is upon us! One thing that happens this time of year is that many of us make year-end charitable contributions. I think it is great that so many of us want to help those less fortunate. As I’ve said many times in the past, Americans are the most generous people on earth, as a people we make charitable contributions second to none. That being said, it is common knowledge throughout the world that Americans are generous and, unfortunately, the lowlifes around the world also recognize the generosity of the American people. As a result, this time of year there are more scams regarding charities than at any other time of the year. Crooks and scam artists know that this time of year many of us put our guards down, and thus, we are more susceptible to being scammed. Therefore, this time of year when it comes to giving to charities, you have to be more vigilant, not less.

When it comes to charities, scams come in a number of different ways. One of the more common scams is where you’re asked to give to a bogus charity. The charity may have a wonderful purpose, its website can be first-class, and the emails you receive will pull at your heartstrings by showing pictures of distressed children or animals. Unfortunately, the goal of these bogus charities is to steal your money and get sensitive information, such as your credit card number. These charities are fraudulent, and you need to weed them out to make sure you don’t give them your hard-earned money.

There’re also other types of charities that are more legitimate in the fact that they actually do give money to a charitable purpose; however, the bulk of the money they raise is not used for a charitable purpose, but rather, for marketing costs and to compensate its executives. I believe these charities should also be avoided, because the reality is if you give $100 to a charity, you want the great bulk of that money going to accomplish the charitable purpose. I never understand why people give money to a charity when so little of the money is actually spent on the charitable goal. The only thing I can think of is that the great majority of people don’t know how that charity spends its money.

I am a big believer that before you give to a charitable organization you ought to investigate that charity. You want to make sure it’s legitimate and the money is well spent. A couple of places I go to check out charities are www.charitynavigator.org and www.give.org. These websites can help you to make sure that you’re dealing with a legitimate charity. Therefore, during this holiday season, just because you’re solicited for a donation doesn’t mean you have to give. My advice, before you commit to donating money to a charity or write a check, do your homework ahead of time to make sure your money is going to be well spent.

With regard to making charitable contributions, of course, there’s the traditional way of just writing a check to a charity; however, there are different alternatives that may be more suitable for you. If you’re over 70½, you can consider using your minimum required distribution to make charitable contributions. Particularly, for those of you who are not itemizing your deductions, this is a great tax saver. For those of you who are not 70½, a good strategy is to donate appreciated securities. By donating appreciated securities to the charity, you’ll receive a full charitable contribution for the fair market value of the gift. In addition, you can avoid paying any capital gains taxes that you would have on that investment. Particularly with the good market we’ve had over the last couple of years, donating appreciated securities can be a very economical way to make charitable contributions.

No matter how much you give to a charity, it’s your money and you want it to be spent wisely. Therefore, it is important that you do your homework ahead of time regarding charities so that your hard-earned money will go to a legitimate charitable organization.

Good luck!

Rick is a fee-only financial advisor.  If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com.