Table of Contents
- How to Verify a Military or Veteran Charity is Real
- Are they registered with the state and federal governments?
- How much of their money goes to overhead? How much money goes to the mission goal?
- Beware of unsolicited requests for money.
- Avoid the hard sell.
- Never send cash and always request a receipt if you want a tax deduction.
- Report fraudulent charities.
- How You Can Support Military Charities
- 1. Donor-Advised Funds
- 2. Real Estate
- 3. Cash
- 4. Stocks
- 5. Pooled Income Fund
- 6. Charitable Trusts
- 7. Private Foundation
- 8. Donating Assets
- Make Sure Your Money Goes to a Good Place
There are dozens, if not hundreds of wonderful military charities dedicated to making the lives of service members, veterans, and their family members or survivors, a little brighter. Many veterans have given more than we as a nation could ever rightfully ask. And it’s great to be able to give back to our veteran community and show them we appreciate the sacrifices they have made.
Unfortunately, whenever money is involved the door is open for scammers to try and part you from your hard-earned money.
We don’t need to cover all the scams and fraudulent military charities out there. This has been done by many sites, including this example of a man who took almost $2 million in cash as a “retirement” for his work (among other high valued perks) and this person who bilked unsuspecting donors out of over $100 million over seven years.
Our goal is to show you how you can protect yourself when giving to military or veteran charities, and ensure that your intended recipients receive the bulk of your gift.
How to Verify a Military or Veteran Charity is Real
Anyone can make something look good on paper or on the Internet. All you need is an official-looking logo and a name that elicits trust. But if you are giving someone money, it’s your duty to know where your money is going. Even if a charity claims to give money to military families or veterans, they may put much more than they give in to their own pockets. Here are some ways you can verify a military charity is legitimate before you give them any of your hard-earned money.
Are they registered with the state and federal governments?
All legitimate charities should be registered with the state and the federal government. Use a search engine to look for “your state + charity list“. That link will take you to Illinois, where I live. Just change the state to your state and verify the charity is listed with your state attorney general’s office, or another regulatory office (each state has different requirements).
Charities should also be listed as 501(c)(3) non-profit organizations by the government. They must meet certain requirements to be listed as a charity with the IRS by law.
How much of their money goes to overhead? How much money goes to the mission goal?
Legitimate charities aren’t afraid to open their books to the public. They understand that if they are running a true charity, the vast majority of their income will go right out the door to support their cause. There are several third-party websites that monitor charities and give them a score based on how much money they spend on their mission compared to how much goes to things like overhead, fundraising, and employees. Here are a few sites to check before ever sending any money to a charity:
When researching charities on the above sites, be sure to look for a charity rating and see if there is information on how the funds are used.
Beware of unsolicited requests for money.
I never give money over the phone. Ever. I always ask the caller for a website where I can research the company or organization before I make any contributions. Any respectable organization will be happy to give you their website, and some will even direct you to locations on the site where you can find information about how they solicit and spend contributions. If an organization doesn’t have a website or tries to avoid giving me the information, I politely decline their solicitation and request to be permanently removed from their calling list.
Avoid the hard sell.
Most organizations that do sales over the phone have scripts for everything. They read the pitch and go down their list. If you ask a question, they have a response on their list ready to go. These scripts are tested and they have them down to a science. The only way to win is to be persistent and avoid a hard sell. Don’t ever commit to giving money until you have a chance to review the organization before you give any money.
If you are being solicited in person, ask the solicitor for a brochure or a card so you can further investigate the organization. Again, any good charity will be happy to share information about their organization. They will be just as happy to receive the money tomorrow as they would be to receive it today. Anyone who pushes the hard sale may be trying to hide something.
Never send cash and always request a receipt if you want a tax deduction.
Cash is untraceable. It is easily lost or misappropriated (in the wrong hands). Some organizations won’t even accept cash. If you want a tax deduction, you will need to prove that you made the contribution. The easiest way to do this is with a receipt or a credit card transaction.
Never give too much identifying information. Some scams are designed to steal your identity. For example, a person may call you fronting as part of a charitable organization. They may ask you for personal information to verify a donation you gave. never give personal information over the phone, especially info such as your SSN, DOB, or other personal info. It can be used for identity theft.
Report fraudulent charities.
If you believe you have given money to a fraudulent charity, or an organization is trying to scam you, you should report it to your state attorney general office or the Federal Trade Commission. You can also report it to any of the websites mentioned above that track charitable organizations.
How You Can Support Military Charities
Traditionally, when one thinks about charitable donations, the automatic assumption is to think of cash.
Cash is a popular method of donation, but there are other options available to you, depending on the amount you want to give, the type of estate you are representing, and the best way to donate.
There are several different ways you can give, and each has its benefits and disadvantages.
1. Donor-Advised Funds
Donor-advised funds and charitable gift funds are popular choices, making up more than 3 percent of all charitable donations in the USA. These funds allow you to donate a non-refundable amount in securities or cash to your chosen nonprofit enabling you to feel closer to the cause, and as though your donation is making a genuine difference.
You can also have a say in the way the funds are used and have the bonus of receiving the maximum tax benefit from the IRS.
You can also arrange for the funds to continue even after your death, meaning this is the perfect way to leave a lasting legacy.
2. Real Estate
Donating real estate to a charity is an ideal way to handle a property you are no longer using, and helps to avoid any unwanted taxes.
You can also arrange for the deeds to your home to be left to a charity of your choice after your death. This option has two benefits: one, you will lower the total taxes to be paid on your estate, and two, you can still benefit from your home while alive.
Passing your real estate to charity can also help you qualify for a tax deduction, and this can be lucrative, depending on the value of the property.
Simple and effective, money is the easiest way to help donate to your chosen charity.
You will be eligible for a tax deduction which is equal to the amount given, with any services or goods deducted. Some memberships to nonprofit organizations, such as zoos or art galleries, can be considered cash donations and treated accordingly.
This method is a super simple way to act as beneficiary and benefactor and absolves you of complicated tax or legal requirements.
If you are looking for tax efficiency in your donation, stocks are the way to go.
These are long-term investments designed to appreciate in value and are perfect for those looking to be smarter with their taxes. Because the assets are being donated, not sold, you will not have to worry about paying capital gains taxes.
The more appreciation, the more substantial your savings. You can also gain a tax deduction if your stocks have increased in value from the original cost; this is considered a donation, and you will be eligible for a suitable tax deduction which is equal to the full fair market value of your stock, for up to 30 percent of your adjusted gross income.
5. Pooled Income Fund
A pooled income fund offers an ideal way to help out a charity while still generating an income.
This option allows you to combine or ”pool’ together, many different securities, or combine securities and cash, increasing the size of the donation, and money will be paid out to you, as well as any other beneficiaries who have contributed assets.
When you die, the remainder of the fund is given to a charity of your choice.
This option may also make you eligible for a tax deduction, which will be equal to the amount of money the charity is expected to receive eventually.
6. Charitable Trusts
A charitable trust is another solid option, and there are two main types to choose from depending on which best suits your plans; a CLT (charitable lead trust) and CRT (charitable remainder trust).
A CLT is established through the transfer of your assets into the trust with a stream of income donated each year from these assets. This money is held in trust for a set period, after which any money left over will be disbursed to beneficiaries, or continue to be held in the trust.
This option has the benefit of offering an immediate gift tax deduction, which is based directly on the value of the income stream to the charity. This is a win-win option. The charity will receive a constant stream of money, and your heirs will be able to inherit without worrying about extortionate taxes.
A CRT acts similarly, with the main difference being the payment. In this option, the donor and any beneficiaries are paid first. They will receive their share of the income before the charity.
This option allows the charity to have a steady, regular cash flow, and the investors to diversify their portfolio and create an income.
Both a CRT and a CLT will require annual administrative management, but this is a small price to pay for the benefits.
7. Private Foundation
A private foundation can be a fantastic way for your family to be involved in your cause and is often started in memory of someone special.
They are set up as corporations or charitable trusts and have the power to offer grants to individuals while allowing you to remain firmly in control of any assets.
There are strict tax laws and regulations surrounding this type of donation, but it can be an amazing way to remember and honor a loved one while making a genuine difference.
8. Donating Assets
There is a range of assets that are eligible for a charitable donation—from life insurance policies and the contents of retirement accounts to physical belongings such as art and jewelry.
One of the key benefits of this action is that you will be eligible for a reduction in your income tax, but there is an additional bonus.
Any gifted item will not have to be recognized by your estate, and this can help to reduce the burden of the estate tax.
This option will also often include any assets which would usually be eligible for an income tax liability, allowing your beneficiaries to receive a good inheritance that is exempt from any extra taxing.
Physical, tangible assets can also qualify you for a tax deduction. This deduction is usually of equal size to the assets donated.
If you give an asset specifically related to that charity, for example, a painting to an art museum or gallery, you will be entitled to a larger tax deduction, so be smart when assigning items.
Make Sure Your Money Goes to a Good Place
Some of these fraudulent organizations have solicitation down to an art. They know the exact words to say to get the best response. But technology is now good enough that you can put the power in your hands. You control your checkbook. So take a moment and review the organization before you write a check. Make sure you understand the organization’s mission, how much of their money goes to the mission, and that you agree with both of these.
As we mentioned earlier, there are dozens of great charitable organizations that support the military and veteran communities. Here is a list of veterans service organizations, along with some organizations we have covered in more depth on our site:
- American Legion
- AMVETS – American Veterans
- Cell Phones for Soldiers – provides Cell Phones for soldiers when traveling on deployments.
- DAV – Disabled American Veterans
- Fisher House Foundation
- SWAN – Service Women’s Action Network
- Vet Tix – provides event tickets to veterans and active servicemembers.
- VFW – Veterans of Foreign Wars
Do you have a favorite military or veteran charity?