How to give it all away to the most deserving cause

Warren Buffett might be an unlikely role model for the action star Jackie Chan, but that's the latest accolade earned by the world's most famous investor. On Wednesday, Chan said that he had decided to leave half his personal wealth to good causes after being inspired by Buffett's announcement last weekend that he would be giving away 85 per cent of his wealth.

Most of Buffett's $37bn (£20bn) donation will go to the charitable foundation run by Bill Gates and his wife Melissa, which has already received billions of pounds from the Microsoft founder. And Buffett and Gates are heading a trend among super-wealthy Americans - the former Citigroup chairman Sandy Weill, for example, is giving away his $1.4bn fortune.

In the UK, such high-profile donations are less common, though we do have a long tradition of philanthropy typified by the Cadbury Foundation, for example. And there are several business figures who have made very large donations to charity, such as the retail entrepreneur Sir Tom Hunter, who has given more than £100m over the past 10 years.

However, while most people do not have the money to make such large donations, charities are keen that people do not think that they can't make a difference. Jonathan Parris, a director of Remember a Charity, says: "If the rest of us do our little bit, we can have the same collective impact as Warren Buffet."

Moreover, while you may not be able to hand over a large chunk of your wealth now, it is likely that you'll be able to do so when you die. Bequests are charities' biggest single source of income, but research suggests they may be missing out. Only one in seven wills includes a donation to good causes, while, according to a Remember a Charity survey, seven in 10 people would like to leave some or all of their money to charity - so clearly many people never get round to arranging it.

Making a bequest is a simple process. Decide what good causes you would like to support, then ask a solicitor to set out a will that specifies the donations you want to make. Writing a will should cost no more than a couple of hundred pounds and enables you to give clear instructions about how you want your estate distributed.

Charitable donations can even save your family money. "Not only are they incredibly cost-effective for the charity, but every penny you give is free of inheritance tax and reduces the taxable value of your estate," says Parris. Estates worth more than a certain amount - £285,000 in the current tax year - are subject to 40 per cent inheritance tax on the excess, so this is a useful option.

There are two other issues to consider. The first is whether to consult your family before making a bequest, particularly if you are leaving a large sum to good causes that they might be expecting to inherit - or may even be depending on. "It's a personal issue," says Parris. "Some people like the idea of their final wish being revealed when their will is read, but it's probably sensible to err on the side of openness."

Second, some people may want to put certain conditions on the gifts they leave to charity - that the money is put to work in a particular area of the good cause's work, for example.

"Donors have a huge amount of control over what is done with their money, as long as it is consistent with the aims of the charity," says Cathy Pharoah, a director of the Charities Aid Foundation. However, she advises people to discuss their wishes with the charity in advance. "It may be a question of negotiating with the charity," Pharoah says. "There could be a balance to be struck between your wishes and the needs of the charity."

Also bear in mind that the position may change in the future. A particular instruction today - that your money is used to buy something specific, say - could be completely irrelevant by the time the charity gets the cash.

If you're keen to hand over sizeable sums to charity while you're still alive, several organisations may be able to help. Buffett's donation has secured him a place on the board of the Gates Foundation, but you don't have to give away billions to get involved in the good causes you support.

David Emerson, chief executive of the Association of Charitable Foundations, suggests that people start by thinking about their own charitable giving strategy. "This should clearly articulate what causes you want to support and how you will support them," he says. "You need a decision process and giving criteria."

Issues to consider include how much you want - and can afford - to give, and whether you want to make a lump sum donation or a series of gifts. Identifying charities to support can also be a challenge. Think about the type of causes you want to support, for example, and in which areas of the country or the world.

Charlie Masding, of Impetus, an organisation that acts as a bridge between large donors and charities, says that accountability is often a key issue. "Our donors want to do something more with their money but don't simply want to give it away," she says. Impetus has a panel of charities it supports and keeps donors in regular contact with their work, though it only deals with individuals able to commit to giving at least £50,000 over a five-year period.

The Association of Charitable Foundations publishes a pamphlet on philanthropy, A Guide to Giving. See www.philanthropyuk.org.

Five ways you can give without having to break the bank

Gift Aid

This tax break enables you to significantly increase the value of any charitable donation you make at no extra cost to yourself.

As long as you're a taxpayer, you can claim Gift Aid on all donations to registered charities. You just have to provide a declaration - even a verbal one will do - confirming you're a taxpayer.

The charity can then claim basic-rate tax relief on your gift, raising the value of every £1 received to £1.28. As a bonus, higher-rate taxpayers can claim back the difference between the basic and higher rates of income tax - currently 18 per cent.

Payroll giving

If your employer does not already operate a payroll-giving scheme, persuade it to set one up. Charitable donations are deducted from your pre-tax salary - the effect is that you get tax relief on the gift at your highest marginal rate of tax. A higher-rate taxpayer would therefore pay only £60, say, to make a donation of £100. Generous employers can choose to match staff donations.

Giving shares

Gifts of stock market investments, including shares, and unit and investment trust holdings, to charities qualify for tax relief on the full value of the gift on the date it is made. After a claim made through a tax return, a gift of shares worth £1,000 to a charity would cost a higher-rate taxpayer £600.

Share Gift (at www.sharegift.org), is a charity set up to accept donations of shares, particularly small holdings that are uneconomic to sell.

Charitable credit cards

Charitable plastic is a way to donate without parting with any cash. Most charities offer a credit card; the accounts are operated by a commercial partner that makes a small donation when you first take out the plastic and also hands over further cash each time you spend money. Just watch out for some uncompetitive interest rates if you don't settle your bill in full each month.

Online charity

Check out The Hunger Site - click on its home page and corporate sponsors will buy food for the starving on your behalf, at no cost to you whatsoever, with no other obligations to worry about. You can log on every day and the site has links to other sites that work in similar fashion.

'I've supported Harvest Help since day one'

Evelyn Arnold first came across Harvest Help in 1985, when it placed an advertisement in the Woman's Institute magazine. The founders were seeking help with the launch of the charity, which works with farmers in rural Africa, helping them to feed their families but teaching them how to become more self-reliant.

"The idea appealed to me because this was an opportunity to help people help themselves, rather than just to give money," says Arnold, a widow who lives in North-west London. She has been a contributor to Harvest Help ever since and has visited a project in Zambia. She has recently changed her will so that part of her estate will go to the charity.

"I've been supporting Harvest Help since day one and I'd like that support to continue once I'm gone so that the charity can continue to grow," says Arnold.

"Although I'm not leaving all of my estate to Harvest Help, I did feel that something should go [to them] and I'll also be leaving a similar amount to my local church."

Arnold has two grown-up children. "My kids are quite capable of looking after themselves," she says. "This won't disturb them at all."