Pooled Income Fund
A pool of contribution assets into a fund invested to benefit donors or their designee. The lifetime income payments vary with the performance of the fund.
What is a pooled income fund?
A pooled income fund (PIF) involves a pool of contributions by donors of cash and liquid assets into a fund invested to benefit donors or their designee. The lifetime income payments vary with the performance of the fund. Payments can be for one or two lives, and are not interrupted by probate. Each donor's proportionate share of all PIF assets will pass to charity at the death of the income beneficiary.
What are some benefits of pooled income funds?
Pooled income funds allow donors to create a steady cash flow of income for their lifetimes or those of others, by pooling the assets and investing them for the benefit of all participants.
A transfer of highly appreciated assets to the PIF may be more beneficial than selling them and contributing the cash. It creates an immediate charitable income tax deduction, avoids capital gains tax, reduces the estate tax, and avoids probate.
The PIF is suitable for both large and smaller gifts and provides confidentiality since the agreement is not a public record like a probated will. Generally no legal fees are incurred by the donor since the transfer agreement is simple and brief.
What are some details and tax issues regarding pooled income funds?
Typically, an income tax charitable deduction is available for the year assets are transferred to the PIF. The deduction is based on IRS tables for computing the present value of the gift that will be transferred by the trustee of the PIF to Oxfam America in the future.
Generally, all PIF income is distributed and taxed to the income beneficiaries rather than to the PIF. If the PIF generates unrelated business taxable income (UBTI), only that portion is taxable to the PIF.
PIF income payments are taxed as ordinary income to the recipient of the payments. The PIF may sell and invest gift assets tax-free since it is a tax-exempt entity. The PIF may not accept or invest in tax-exempt securities.
Income payments must be for life rather than for a fixed term of years. The donor, however, may terminate payments at any time by donating the income interest to Oxfam America.
Single-life payments or joint and survivor income payments are available from the PIF. Income payments can not be made to an unborn class of individuals (e.g. grandchildren) or to an entity such as a business. Payments must be made to one or two named individuals living at the time of the gift.
Contact our gift planning specialist for more information.