Pooled Income Funds

Description

A pooled income fund is a charitable trust established and maintained by a qualified nonprofit organization, providing a donor and/or his or her beneficiaries with a potential lifetime income stream based on a prorated share of the income earned by the fund. Remaining assets are eventually distributed to the charity that maintains the fund.

Key characteristics

  • Potential immediate partial tax deduction, based on the donor's life expectancy and the anticipated income stream
  • May minimize capital gains tax for gifts of long-term appreciated securities
  • Income stream is taxable to the income beneficiaries
  • Professional investment management

Details

A pooled income fund is a charitable trust established and maintained by a qualifying nonprofit organization, providing a lifetime stream of income based on each donor's share of the income earned by the fund.

A pooled income fund is similar in many respects to a charitable remainder trust. Donors may be eligible to take an immediate partial tax deduction, based on their life expectancy and the anticipated income stream, but must pay income tax on the income they receive from the pooled income fund each year.

Pooled income funds are professionally managed — and a way to convert appreciated assets into income while minimizing capital gains tax.

The balance in the fund is distributed to the charity that maintains the fund after the death of the last beneficiary.