Last week, investor Warren Buffett announced he would be giving more than 30 billion dollars of his fortune to a philanthropy organization run by Microsoft founder Bill Gates and his wife, Melinda.
While not everyone has that much to give, it may have inspired more than a few to consider how they could help their favorite charities. Ray Hennessey, editor of SmatMoney.com, offers some advice for the non-billionaires wanting to donate.
A good place to start when wanting to donate a sizeable amount of money to charity is a Donor-Advised Fund. "It's a way to eventually invest like a big spender if you id you don't have the money now," explained Hennessey. "You're taking money you ear marked for charity and you are letting fund companies build a nest egg with that and then down the line give money away to any charity you want."
Right now, you can donate up to ten thousand dollars a year in a donor-advised fund. "That's what most people gift when they are thinking about their estate plans," said Hennessey. "The best part about it is no matter what you do, you get an immediate tax deduction. It's like giving to a charity right away."
Another great thing is you can use the money and donate it to any charity you want. "It's got to be a certified charity, so it has to be recognized by the government as a charity," Hennessey said. "Once that money grows, you can give that away to your college, you can give it away to the Red Cross if there is another disaster like Katrina."
You also get a double tax benefit - once when you donate to your fund, and then again when you donate the total mature (and hopefully much larger) amount to your charity years down the road.
But Hennessey warns this type of invest is not perfect. "It's like any other investment, you're going to be charged fees on it," he explained. "You have to make sure the fees that are being taken out aren't as high as what you are making in returns."
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by Jenn Eaker
Copyright 2006 CBS. All rights reserved.