The following article comes from the U.S. News ebook, How to Live to 100, which is now available for purchase.
The past few years have been tough on American consumers. A weak economy, combined with high unemployment and stagnant wages, has made it difficult for many to make ends meet.
But despite the hardships, Americans remain some of the most charitable people on earth. According to the American Association of Fundraising Counsel, Americans donated more than $290 billion in 2010, up 3.8 percent from 2009. Foundations, including large organizations like the Bill and Melinda Gates Foundation or the Lilly Endowment, gave $41 billion, or about 13 percent of all U.S. donations.
But the largest portion of donated money in the United States came from individuals or households. They accounted for $211 billion, or 73 percent, of all donated money. According to Jerold Panas, executive partner and chief executive officer of Jerold Panas, Linzy and Partners, a philanthropy consultancy based in Chicago, few people adequately plan the most effective giving strategies.
"The heart and spirit of people in this country is so great," Panas says. "Cash and pledge gifts are so important to the ongoing operation of a charitable organization, but many people don't plan giving. Most people should be planning by talking to an accountant, a financial adviser, and attorney."
Even with end-of-life giving, planning should start early. Panas says many people opt to give large gifts upon death. This method provides relief from estate taxes on money left to family members. But decisions about end-of-life donations should start well before one reaches old age.
Panas suggests identifying an organization at a young age—a beloved Catholic high school, for instance—and then plan your estate over the years to achieve the maximum benefit for the school.
"The Catholic school would send out from time to time a reminder about giving to the school and about leaving the school in your estate plans," Panas says. "The next time you go to your attorney, you begin to address the idea of leaving something to the school. As you get older, and your salary increases and your status is higher, you'll change your will but you'll remember the Catholic school."
This kind of advanced planning also helps to mitigate end-of-life disputes about intentions, Panas says. "The disadvantage of doing that is that when someone is in their mid-70s and [you're] talking to them about the end of their life and death, it's not a happy visit," he says.
Identifying the best organization. Ken Berger, chairman and chief executive office of Charity Navigator, an organization that evaluates charities in the United States, says many people often rush to donate without doing due diligence on the organization's effectiveness.
"The fundamental challenge that we see in charitable giving in this country is that it is entirely heart-based and not using one's head," Berger says. "Research shows that 85 percent of charitable giving is done on an emotional basis with limited or no info on the charities in question."
Charity Navigator provides resources for those looking to donate, including tracking charities' performance and effectiveness. "The vast majority of charities do not provide meaningful data on the results of their work," Berger says. "We try to bring together at least some information that is available. Our basic message is that people need to at least do a preliminary look at this information to avoid getting ripped off."
Scams can also be avoided by long-term planning and years of due diligence, Berger says.
"The best way to give is in a planned, proactive way both while you're alive as well as after death. As part of financial planning, when you look at your investments, budgets, and plans for each year, charitable giving really should be a part of that plan. It should involve giving on some consistent basis annually as well as after death," he says.