Charitable Pooled Income Funds
|
A charitable pooled income fund, or PIF, is a variety of charitable remainder trust which operates in some ways like a mutual fund. They are generally operated by the charities themselves. Examples of charities providing this service include the Red Cross and the Nature Conservancy. Because assets of many donors are combined together in pooled income funds, they work well for smaller donations. Typically the charity running the PIF serves as trustee, and invests the donated funds in variable-return investments like stocks and bonds on their behalf. Pooled Income Finds resemble mutual funds in a number of ways. First, assets of donors are pooled together and invested in stocks, bonds, and other assets. Second, donors are generally issued "units," which operate much like mutual fund shares in determining the level of ownership for a donor in the fund's assets. Third, dividends and capital gains are distributed to holders of units based on the number of units held. Donors receive variable income for life from the fund, based on its investment performance. Alternatively, as with other charitable remainder trusts, the donor can specify one or more beneficiaries to receive the income. The income can be tied to the life of the donor, to the beneficiaries, or for a set term of years. Once the specified period ends, the remaining assets in the fund associated with the donor are transferred to the control of the charity that operates it. Pooled income funds suffer from some of the disadvantages of mutual funds as well, however, in that the regulatory structure enforced on the managers of pooled income funds can force them to use investment strategies that deliver sub-par results. It is well known that 90% of mutual funds on the market fail to beat a simple index fund in any given year, and even fewer can beat the S&P500 index consistently. Detailed statistics on pooled income funds are not as readily available as for mutual funds, but it stands to reason that their performance would be similar. Tax TreatmentThe federal tax deduction you are eligible to receive when donating to a pooled income fund is determined in much the same way as for charitable remainder trusts. It is computed based on an IRS formula that considers your age, the ages the income beneficiaries, the predicted payout of the fund based in its investment strategy, and a federal index income tax rate. Generally speaking, the older you are at the time of the gift, the larger tax deduction you may be eligible for based on the size of the gift.In addition, you pay no capital gains tax on appreciated assets you donate to a pooled income fund. In this way, you may generate income derived from the entire amount of an appreciated asset, while taking a deduction for the gift, and avoiding capital gains at the same time. This can often operate to create a sound financial strategy for a donor, while still benefiting charity.
Charitable Trusts | Privacy Policy | Legal Disclaimer | Contact Us | |
Charitable Trusts Menu
- Trusts
- Living Trusts
- What Is A Charitable Trust
- Types Of Charitable Trusts
- Charitable Remainder Trust
- Charitable Remainder Unitrust
- Types Of Charitable Remainder Unitrusts
- Charitable Remainder Unit Trust
- Taxation Of Charitable Remainder Trusts
- Creating A Charitable Remainder Trust
- Charitable Lead Trusts
- Charitable Lead Annuity Trust
- Charitable Remainder Annuity
- Deferred Charitable Annuity
- Charitable Gift Annuity
- Planned Giving
- Charitable Bequest
- Charitable Pooled Income Fund
- Retained Life Estate
- Donor Advised Funds
- Irs 501c3
- Non-Profit Support Organization
- Cowles Charitable Trust
- Pew Charitable Trusts