A Good Way to Give Well

Tis the season for giving. But like any financial transaction, there is a right and wrong way to go about your charity.

For all the talk about "ugly" Americans, ours is an extremely generous nation. Americans give more than $300 billion per year in charity, twice as much as any other nation, and 76% of that comes from the pockets of individuals, not foundations or corporations.

That said, while not stingy, Americans are often are sloppy givers.

"We tend to be reactive, instead of proactive when it comes to charitable giving," says Kim Wright-Violich, president of Schwab Charitable. "Responding to the requests of friends and family over the course of a year can lead to very inefficient giving."

A better way, suggests Wright-Violich, is to use donor-advised funds that enable investors to track donations and maximize tax benefits similar to the manner in which a private foundation would. Or in other words, giving like Bill Gates, even if you don't have his billions.

A donor-advised fund is housed in a public charity, which means donors receive the maximum tax deduction available, while avoiding restrictions and fees imposed on private foundations. The way it works is that the deduction is received by the donor at the time of the gift, giving the fund's sponsor full control over the contribution. In turn, the contributor becomes an "adviser" with the power to recommend the direction of charitable grants.