Many people are familiar with donor advised funds (DAFs)—charitable giving vehicles that allow individuals, families, or organizations to make tax‑deductible contributions, place those assets in a dedicated fund at a sponsoring organization, and then recommend grants over time to qualified 501(c)(3) charities. Because the donor retains advisory privileges while the sponsoring organization maintains legal control of the assets, DAFs offer both flexibility and administrative ease.
DAFs are just one option, though. Sponsoring organizations can offer a wide range of charitable fund types designed to meet different philanthropic goals. Although these funds generally operate similarly from a financial standpoint, they differ in purpose, minimum contribution requirements, the degree of donor involvement, and the parameters that guide grantmaking. Community foundations, in particular, tend to offer the broadest mix of these fund structures to support both donor intent and local community needs.
We have summarized the most common fund types below:
- Donor Advised Funds (DAFs)
- A charitable giving account that allows a fund advisor wide discretion to recommend gifts to charitable organizations. While the sponsor legally has the final say on whether a grant is made from these funds, it is rare for them to deny a donor-advisor’s request.
- A sponsor may make a distinction between DAFs for individuals and for corporate entities.
- Field of Interest Funds
- A fund type which only provides grants to charitable organizations of a specific interest area. Potential grant recipients are typically identified by the sponsoring organization. A field of interest fund may, for example, only support causes related to animal welfare within the sponsor’s service area.
- Designated Funds
- A fund type which only supports a specific charitable organization or organizations, as specified by the donor.
- Discretionary Funds
- These funds support community needs and the sponsor’s charitable mission. Grant recipients are chosen by the sponsoring organization, not the donor who established the fund.
- Funds called “Unrestricted Funds” sometimes serve the same purpose.
- Scholarship Funds
- A fund type that solely exists to provide scholarships to students. These can be advised by the sponsor or an individual, depending on the sponsoring organization’s guidelines.
Outside of these broad main categories, a sponsoring organization may offer other unique fund types, or even the opportunity to create a supporting foundation. It’s common for fund types to be further divided into endowed and non-endowed versions as well. This diversity requires looking at a sponsors’ individual fund offerings in order to fully understand the purpose and use of a fund.
For non-profits, it can often be difficult to understand what specific type of fund a donor is using. And, when a donor recommends grants in a way that mirrors the giving from another fund type, it muddies the water even more.
While every type of fund denotes a degree of charitable affinity, understanding the specific type of fund a donor is using can help provide greater insight into donors’ charitable interests and behavior. As such, this is a worthwhile area to investigate.
If you are lucky enough to have a direct relationship with the donor, weaving this into a conversation is the best approach. When that is not an option, consulting the sponsoring organization’s website is the best way to gather some clues.
For those wanting to learn more, we have provided samples below of the fund types available at several sponsoring organizations:
- Community Foundation of Randolph County
- Silicon Valley Community Foundation
- Tulsa Community Foundation
- California Community Foundation
- Greater Worcester Community Foundation
- Arkansas Community Foundation
*Image copyright by Avery Whitlock
