We have a family fund within our extended family. The fund is designed to be a collection in case someone in the family requires that money unexpectedly (e.g. sudden death of the main bread-winner).
The rules of the fund are that everyone contributes what they can. The money may only be dispersed amongst family members. Alhamdulillah, nobody in the family currently requires this money. The fund is accumulating and the target is $100,000 USD.
Does contributing to such a fund count as Zakat or Sadaqa? Or should this be treated like a savings account for the family and be separated from one's obligatory donations?
Zakat means giving to the poor and needy Muslim. So creating such funds would require that the recipient of Zakat are poor, otherwise it would be invalid. Saying that, a separate account to help well-off families in problems can be created. If however, you have poor family members then you could make this Zakat fund and give Zakat from it without undue delay (delaying payment beyond a year), and delaying it unduly without excuse is sinful.
Also, it should be noted that when creating this fund family members such as, a parent/grand parent can't give Zakat to their children/grand children and vice versa. But it may be given to siblings and other relatives.
