People often have well-established and respected charities that are close to their hearts. However, when considering donating to less-familiar charities, donors should be cautious.
CNN recently reported that many charities actually do very little for the causes they purport to assist and that “the 50 worst charities give less than 4 percent of donations raised to direct cash aid.” Vast sums of donated funds go to pay for-profit fund-raising companies and lavish executive salaries and perks, before any cash goes to aid the needy cause. In other words, they basically “raise money to pay themselves.”
Organizations such as Charity Watch and Charity Navigator provide rankings of the best- and worst-rated charities. Charity Navigator has also issued its “Top 10 Practices of Savvy Donors,” which includes “Hang up the phone on for-profit fund raisers.” Another top practice is not falling for the “sound-alike” charities. CNN called the Kids Wish Network “the worst charity in America,” while the similar-sounding Make a Wish Foundation is highly-rated by Charity Navigator. So-called “instant charities” that pop up after a world disaster such as an earthquake should generally be avoided, as well.
America is truly a “nation of givers,” of both cash and time, according to the American Enterprise Institute. A study by social scientist Arthur C. Brooks shows that Americans give well over $300 billion to charity, not including the value of our volunteered time. During the past 50 years, while GDP has risen about 150 percent, charity has risen about 190 percent. So, while Americans have grown richer, charitable giving has grown even more.
Our advice to the generous client: In addition to getting solid financial, tax and legal advice with one’s charitable plan, don’t forget the due diligence on the charity itself.