Hidden no more: Unrestricted Funds, Designated Funds, and Field of Interest Funds

Most attorneys, accountants, and financial advisors are well-aware of Donor Advised Funds and the reasons behind their popularity. Especially when a Donor Advised Fund is established at the Foundation, this vehicle is an excellent way for your clients to organize their charitable giving and get even more connected to the causes they care about. 

Enter the Qualified Charitable Distribution

Your clients can give nearly any type of asset to a Donor Advised Fund at the Foundation. A notable exception, though, is the Qualified Charitable Distribution (QCD). A QCD allows a taxpayer 70 ½ or older to make a direct transfer of up to $100,000 annually from an IRA to a qualifying charity. A Donor Advised Fund is not considered to be a qualifying charity.  

Although Donor Advised Funds cannot accept QCDs, the Foundation offers other types of funds that can accept QCDs. For example, unrestricted funds, Designated Funds, and Field of Interest funds held at the Foundation are ideal recipients of QCD transfers. These fund types are often overlooked, despite the high value they can deliver to your client and to the community. 

Open a Charitable Fund

What is an unrestricted fund?

The Council on Foundations defines an unrestricted fund as “one that is not specifically designated to particular uses by the donor.” Unrestricted funds are extremely impactful and are a great option for your clients who want to support the ever-changing needs of our community. Foundation staff utilizes unrestricted funds each and every year to ensure they are being put to the best possible use supporting the nonprofits and programs that improve the quality of life in our region.

What is a Field of Interest Fund?

A Field of Interest Fund is defined as, “A fund held by a community foundation that is used for a specific charitable purpose such as education or health research.” Perhaps your client is passionate about rare-disease solutions, feeding the food insecure, or preserving works of art, for example. Your client selects the name of the fund (family, cause-related or even nondescript) and then, the knowledgeable team at the Foundation distributes grants from the Field of Interest Fund in a way that is aligned with your client’s values and charitable wishes outlined in the fund documentation.

What is a Designated Fund?

A Designated Fund is defined as, “A type of restricted fund in which the fund beneficiaries are specified by the grantors.” These are a good choice for a client who knows they want to support a particular nonprofit or several nonprofits for multiple years. The client names the fund and the Foundation fulfills the distributions. Made over time, these funds can help the nonprofits’ cash flow planning. Distributions are aligned with your client’s wishes set forth in the original fund document. 

Consider nonprofit funds

While unrestricted, Designated, and Field of Interest Funds are excellent options for your clients who may wish to open their own fund with a QCD, the Foundation also manages dozens of Nonprofit Funds. Nonprofit Funds are opened by nonprofit organizations looking to secure their long-term sustainability. Each nonprofit fund directly benefits the nonprofit that established it. Our staff at the Foundation is always happy to share our list of nonprofit funds with your clients. Perhaps their favorite nonprofit already has a Foundation fund. Your clients can direct their QCDs to any nonprofit fund at the Foundation.

QCD reminders

For the client aged 70 ½ through 72, a QCD removes funds from an IRA before the client reaches the age-73 threshold for Required Minimum Distributions (RMDs). This can lessen the eventual income tax hit that accompanies RMDs. And for RMD-applicable clients, the QCD counts toward their RMD. In both cases, the QCD transfers do not fall into the client’s taxable income.

QCDs are even more popular now that the $100,000 cap will be indexed for inflation under the new laws. Also, under the new laws, a one-time, $50,000 distribution to a charitable remainder trust or charitable gift annuity is now permitted. 

Ready to Open a Charitable Fund?

We are here to help you simplify your giving and strengthen your impact. We look forward to helping make your philanthropy powerful and rewarding, creating the lasting change you want to see — in this community and beyond.