How to know if a charity can be trusted with your money? This one thing can tell you

San Francisco Chronicle​

04-05-2025

Reader Lisa in Palo Alto asks:
I'm updating my living trust, and would like to set aside some of the funds from my estate for charities. However, over the past several years, I've heard or read about instances of money being donated to a charity, but as little as 10% to 20% actually gets to the cause itself — the rest might go to 'unscrupulous people,' which infuriates me. Is there any way I can find out which charities can be absolutely relied upon to use at least 80% of the money donated to helping the specific cause?
Many of us have charitable instincts, but might not know where to direct them. Andrew Katzenstein, a tax and estate planning attorney and lecturer at USC Gould School of Law who works with high-net-worth clients, said one client came to him with a conundrum: He had $50 million he wanted to give away. But he didn't know who to give it to. He liked the idea of seeing his name on a building on his drive home from work.
He recommends clients identify what their interest is, and from there, narrow down what they'd like their gift to do. For instance, if you decide diabetes is your chosen cause, do you want to support an organization that helps people living with diabetes, or one researching a cure for it? There's not a wrong answer — just a right one for you.
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Eric Flett, the regional president of wealth management firm MAI Capital, said he tells clients to reflect on what brings them joy: animals, music, education, art, health and welfare, to name a few.
'A lot of us use all these great resources in the Bay Area without realizing that these are probably heavily funded by philanthropic organizations,' he said. So the next time you're enjoying a hike or a play or a museum exhibit, think about looking into what groups support those endeavors. He recommended both the San Francisco Foundation (sff.org) and the East Bay Community Foundation (ebcf.org) as good places to look for charities that work in your communities.
Once you've identified your charitable interest, is there a way to know how 'effective' a charity will be with your money? Yes. And no.
Yes, in the sense that many nonprofits and foundations file something called a Form 990, which you can look at to see where donations go. The general benchmark in the philanthropy world is that about 75% to 85% of donations should go to the cause itself, while about 15% to 25% goes toward administrative overhead — think fundraising efforts and employee salaries.
Websites like Charity Navigator, GuideStar and Better Business Bureau's Wise Giving Alliance aggregate these filings and rate charities on their efficacy. ProPublica publishes a database of charities' tax returns.
Charity Watch and GiveWell do deeper dives into nonprofits' finances to see how carefully donations are spent and which ones are dollar-for-dollar the most effective. But that level of analysis means they're limited in how many organizations they can evaluate — so if you don't see your favorite charity on there, that doesn't necessarily mean it isn't a worthy one.
These are all good places to start your search. But rating sites like Charity Navigator don't tell the whole story, said Cecilia Diem. She's the director of the Center for Civil Society, which offers trainings and activities to help nonprofits and foundations operate more efficiently, and publishes the online journal Philanthropy Daily. Those sites tell you that the organizations aren't fraudulent — that the unscrupulous people you're concerned about aren't pilfering your hard-earned money — but they don't always offer a ton of insight beyond that.
A four-star Charity Navigator rating isn't meaningless, 'but all that means is that you have financial statements and that you've made them available,' she said. 'The Charity Navigator rating is not going to tell you anything about whether or not they will honor your intent or how they operate or their leadership.'
She said the best way to find out how a group is going to steward your major gift is by getting involved before you give it. She recommended making what she called a 'handshake donation' to start: $500 or $1,000. That amount should put you at the threshold where the group will reach out personally to thank you with a note or a phone call.
'It's amazing how few nonprofits actually do that, and that's a really good indication of how, if they take your $1,000 gift seriously, then they're probably going to take larger gifts seriously,' Diem said. 'If you give $1,000 and no one can be bothered to acknowledge it or thank you for it, I wouldn't have a lot of confidence that they're going to feel any particular loyalty to what your interests and wishes are when you're leaving them money after you die.'
Raul Gastesi, an attorney who specializes in trusts and estates, says he always recommends clients get involved with the charities they choose: 'It gives you a feel for how really effective they are and how effective your contributions are going to be.'
That's what Katzenstein's $50 million donor did. First, they worked to narrow down his interests: He was drawn to medical causes and curing diseases. They looked up his commute and found a hospital he passed every day. An introduction was made, and the client went on to make a number of substantial contributions and got personally involved with the organization. And his wish was granted: His name is now on the side of the building.
You might not have hospital-naming money to throw around. But you can do your own research and start building a relationship with an organization now to make sure your future contribution will be well-spent.