Most people are not in the league of billionaire Bill Gates who donated $106m to launch his charitable foundation seven years ago, but there is an increasing willingness to give generously to charity.

Mark Evans, head of philanthropy at Coutts, has certainly seen an upturn in clients wishing to donate part of their wealth to worthwhile causes. He is currently working with a family who are committing several hundred millions of pounds to establish a charitable trust. Other clients just want to donate regularly or make smaller one-off payments to their favourite cause.

Evans believes the first thing that anybody looking to create a giving strategy should do is to really think about their motivations and objectives. Potential donors should ask themselves why they want to give, what personal factors have influenced that decision and consider their basic values.

“It is not about choosing the charity first,” says Evans. “It is about really understanding yourself and then understanding more about the causes you are interested in.” Only then should a potential donor sit down and really consider how much they can afford to give or, indeed, want to give over a period of time.

It may be wise to include a financial adviser in this soul-searching as there may be time-sensitive tax considerations to think about, such as giving shares to a charity by April 5 to obtain tax relief on the gift in the current year, or indeed implications for your financial situation if you intend to make regular, large payments or even to bequeath money donations in a will.

“The majority of charities, representing nearly 60% of the sector, share less than 1% of total donations and have an income of £10,000 or less. The largest 667 charities attract over 49% of total income, while around 15,500 receive more than 90%.”

“Sometimes people first consider a giving strategy when there has been a rush of liquidity from an event,” explains Evans. “Perhaps they have just sold the family business and want to set up a charitable foundation with part of the proceeds.”

It is only when the decision to donate, and the financial implications of that action, have been fully understood, that potential donors should consider where their charitable interests lie. For example, younger donors might feel passionate about the environment or humanitarian needs, while others might be keen to work with a charity that works to protect the cultural heritage. Some donors prefer to retain interests in the local area in which they operate and live.

But this is not an either/or situation. There are no restrictions on potential donors on either the number of charities they work with just as there are no limits (either upper or lower) on the sums involved.

Evans finds that some people prefer to set aside a percentage of their planned annual donation to each chosen category in order to ensure there is enough money for all. It is also wise to consider a contingency fund so that, in the event of a disaster appeal or an unexpected request, there is money available to respond.

The website of the Charities Commission provides information on all 191,000 registered charities in the country, which at the end of the second quarter had a combined annual income in excess of £43bn.However, this figure distorts the overall picture. The majority of charities, representing nearly 60% of the sector, share less than 1% of total donations and have an income of £10,000 or less. The largest 667 charities attract over 49% of total income, while around 15,500 receive more than 90%.

Researching information like this may actually determine your charitable stance, encouraging a move away from well-established and well-funded charities to less well-supported ones operating in the same sector.

Evans recommends initial research, or ‘preliminary due diligence’, to identify what needs are most pressing and what needs are less well served. “Rather than writing a cheque and sending it, doing some research helps you to understand the issues and best direct your efforts,” says Evans. “It also makes giving more effective, which should result in the desired impact.”

It is also wise to research the different mechanisms to donate funds, which range from supporting specific charities through payroll giving to setting up a private charitable trust or using an intermediary, such as a venture philanthropy trust or community development institution.

Coutts is associated with three intermediaries; Charities Aid Foundation, which has championed effective giving for more than 30 years and helped more than 400,000 donors to maximise the impact of their giving. Similarly, Community Foundations connects local projects with donors, and promises to take care of all the administration.

The New Philanthropy Capital, on the other hand, takes investment banking analysis techniques and applies these to independently research charities and offer tailored advice to potential donors on the areas where their support is most needed and could be best used. Its unique approach has appealed to many potential City donors, who are keen to see a return on their ‘investment’.

Some people may want to donate time as well as money or to specific one-off projects in which they have a particular interest. Once a potential donor identifies exactly what it wants to achieve, the intermediaries will aid the process.

If you are interested in going one step further and actually setting up your own charity  click here for Coutts Woman’s top tips.

By Helen Dunne