Whenever large sums of money are involved, don’t be surprised if scammers come out of the woodwork. This is especially true today, as criminals have a variety of tools at their disposal, such as phishing emails, designed to separate you from your hard-earned wealth. Here are examples of inheritance-related frauds as well as a few other financial-related frauds.
Inheritance scams
Not surprising, inheritance scams typically promise a significant financial windfall. In one scam, you might receive a letter from a “law firm” (or perhaps a “bank”) claiming that one of its clients has died, leaving a large inheritance or life insurance policy. The entity was unsuccessful in attempting to reach the client’s family members and believe that you’re a distant relative. Often, the “firm” will offer to split the inheritance or life insurance proceeds with you, the firm and some charities.
However, here’s the catch: To obtain your newfound wealth, you need to send a payment to cover the taxes and fees. Or you may need to provide your Social Security number, birthdate and bank account number so they can wire you the funds. If you receive this type of communication, don’t respond. It’s nearly always a scam designed to steal your money or your identity (or both).
Another scam involves an email or text purportedly from the IRS, claiming that you owe tax on a large inheritance. Even if you did receive an inheritance, you shouldn’t reply to these messages or click on any attachments.
For one thing, the IRS never initiates contact with taxpayers regarding tax bills or refunds via text, email or social media — it almost always uses regular mail. Plus, there’s no federal inheritance tax. The federal estate tax is paid by the estate, not those to whom the estate is distributed. (Note that a few states have inheritance taxes.)
Fake charities
Fraudsters may pose as charitable organizations to steal your money as well as your identity. And, adding insult to injury, you can also lose valuable tax deductions.
Often, fake charities claim to be raising funds to help victims of natural disasters or wars, and they may use names that sound similar to well-known charities. They may also use fake emails or manipulated caller IDs to convince you they’re legitimate.
The IRS urges people to resist pressure tactics (legitimate charities rarely resort to such tactics), avoid organizations that request donations by gift card or wire transfers, and never share your Social Security number or other unnecessary personal or financial information.
To avoid these scams, always vet an organization before you donate — for example, by using the Tax-Exempt Organization Search tool on the IRS’s website — and only make donations by check or credit card.
Don’t fall victim
To avoid falling victim to these and other scams, always be vigilant, especially when contacted by email, text or social media. And when in doubt, talk to your advisor to help determine a communication’s validity.
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