What is the difference between an unrestricted fund, a designated fund, and a donor-advised fund?

Unrestricted funds are those given to a community foundation by a donor with broad philanthropic interests but no specific recipient in mind. The donor gives the community foundation the flexibility to invest in the community’s most pressing needs. Unrestricted funds allow community foundations to ensure that the organizations and projects that could really benefit from funding are given support.

Designated funds allow the donor to specify organizations or charities for their fund to support. For example, a donor may wish to establish a fund that will support their church or alma mater in the years to come.

With a donor-advised fund, donors and their heirs can recommend grant recipients each year, allowing donors flexibility in supporting the causes they care about without the demands and costs of establishing a private foundation. (See the ways in which a private foundation and a donor-advised fund differ through this comparison chart.)

While these are the three main types of funds, there are other types available to donors wishing to leave a legacy in their community. Please speak to your professional advisor and your local community foundation for more specific information and recommendations.