OCTOBER 04, 2020
More than 800 community foundations operate in the United States, serving areas large and small. What all community foundations share is a long-term commitment to their place, through the pooling of resources from many donors into a permanent endowment. Community-foundation grants totaled nearly $10.19 billion in 2018.
Giving options through a community foundation
If you have wide-ranging interests in a particular locale, community foundations are a prime charitable vehicle. Options include:
- giving through a donor-advised fund (DAF);
- giving to a general unrestricted fund, which allows the foundation the most flexibility to respond to community needs and to fund its own programs;
- giving to a field-of-interest fund to address one or more of your giving priorities, e.g., arts and culture, children and youth, environment, etc.; or
- establishing a designated fund to support a specific charity or provide scholarship funds.
Be aware that all gifts to community foundations, including those which establish DAFs, are gifts that you no longer legally control. A governing or distribution board—designed to reflect community interests—typically oversees grantmaking activities of unrestricted and field-of-interest funds, so your contribution could go to a cause you find objectionable. Community foundations may also impose restrictions on prospective grantees that counter your giving preferences. They may disallow requests for general operating support or capital projects, for example. Make sure you understand such grantmaking guidelines before donating.
If you choose to give through a community foundation, two options are available that offer some level of donor-intent protections:
- DAFs: Giving through a DAF offers the most security. In fact, protecting your intent will be difficult—if not impossible—with non-DAF giving options.
- Designated funds: Using a designated fund allows you to specify the beneficiary organization(s) and giving timeframe. This gives you more control. But remember that designated funds are not DAFs: If your designated organization goes out of business or changes its purpose, the community foundation has the right to use your designated fund to support other organizations with similar missions or programs.
In many instances, donors and community foundations forge long-lasting and mutually rewarding relationships around a specific place to which they are both committed. But community foundations are no longer the only option for donors who want to support their local community but don’t have the assets, time, or interest to establish their own charitable entity. From a donor-intent perspective, it’s wise to explore non-DAF giving options at community foundations with a good deal of caution.