Amidst Charity Scams, Donor Advised Funds May Be Best for Big Givers

News of charity scams has been more prevalent than usual with several recent national tragedies on our minds: Superstorm Sandy, the Newtown shooting, the Boston Marathon bombings, and the explosion at Texas’ West Fertilizer Company. It is touching to see so many Americans wanting to help, wanting to donate money for medical expenses or emergency supplies and more—but it is also disheartening to see that generosity taken advantage of.

As if current events needed more tragedy, charity scams discourage that generosity to some degree. People who have either heard of or experienced first-hand being conned out of money given in good faith might not give because they don’t want to be swindled. But it doesn’t have to be that way.

Those with smaller donations should give to well-known or large institutions during times of crises. For those with upwards of $5,000 to give, though, using donor-advised funds may be the best route. These funds are essentially accounts set up at a public charity or foundation that donors deposit money into. The responsible organization then distributes the funds to legitimate charities while keeping in mind the donor’s recommendations and preferences.

Initial donation amounts vary, with the minimum generally falling above $5,000.

Donor-advised funds are safe and effective for big givers.
Image from ccf-mn.org

Using such a fund essentially eliminates the chance that donors will accidentally donate to a scam. It makes giving simpler and less worrisome, and is easier than setting up a private foundation. Donations to the fund are considered tax-deductible, and donors often are able to advise the charity on how the money should be invested. But all the nitty-gritty pieces are taken care of by the charity—the bookkeeping, the distribution, and the details.

Donor-advised funds are also great ways to help support smaller nonprofit organizations, as they provide a source of funding and can grow over time with interest. In times of economic hardship, they can become even more valuable.

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