Estate Planning: How to Select a Charitable Organization

June 22, 2015

charitable-organizationCharitable Giving—Decisions! Decisions!

You have decided for a few reasons—personal satisfaction, legacy purposes and less tax burden on your family—to leave some of your wealth to charity in your estate plan. That is great news for your chosen charities; however, deciding whom to give those dollars to isn't such an easy choice. There are many considerations before you share your prosperity with an organization. Let's take a look.


Charitable organizations have recently been in the news for mishandling money and other mishaps, making many people hesitant and less likely to donate to a once-respected organization. These news stories, however, shouldn't keep you from contributing money to causes that you believe in. They do provide an opportunity to ask questions of yourself and your family, and to ultimately make that important decision on where your money will eventually go.

1. Is it a legitimate charity?

If the organization is a nonprofit and has IRS 501(c) (3) status (i.e., tax exempt), then you are at a good starting point. Just because it's an above-board charity doesn't mean it uses its donation dollars prudently, so be proactive and research the organization's activities. Find out about its accountability, governance and transparency practices.

2. Do I give to just one or various charities?

Well, that's up to you. Many individuals diversify their charitable contributions since they can't just choose one. I see many individuals spread their giving to both national and local (some national organizations work on a local level) charities.

3. Should I involve my family? 

Making a difference is a wonderful feeling, and sharing that feeling with your family brings joy to everyone involved. Think of it as a family decision—when your assets eventually go to an organization, family members have no bitter feelings or thoughts since they were a part of the decision-making process.

4. What else should I consider?

I left the most important question to ask for last. Always check the financials of the charity. For instance: How will your dollars be distributed by the organization? Some organizations spend more on their CEO and staff paychecks and overhead (i.e., expenses) than giving money to the actual cause they claim to help. Ensure that the organization clearly states its financial information and provides website links to past reports online (to discover where and how your donation will be used). Also, look into the charity's financial health (e.g., does it have enough right now for long-term survival?).

One Last Thought

I will leave you with a happy thought. All of the individuals I work with who have placed charities in their estate plan have all said one thing: It's one of the most satisfying decisions they've made. Knowing that they're still able to help people even when they're no longer here brings a sense of peace and joy.