Pooled Income Fund: Questions Donors Ask

A PIF is invested to produce a reasonable income for all income beneficiaries who own units (or shares) in the fund. It works much like a mutual fund, in which a donor’s investment is pooled with the dollars invested by all the donors, and the entire amount is invested in a common fund. Income is distributed annually to all income beneficiaries depending on the number of units (or shares) each owns in the fund.

Yes. Donors can make additional contributions to their pooled-income account at any time. The donor will increase the number of units they own in the fund and, thus, their income. The donor’s income tax charitable deduction amount will be the same for a gift of cash or securities, but a cash gift will be deductible against a larger percentage of their adjusted gross income. However, a gift of appreciated securities has the benefit of avoiding capital gains tax.

Each of the following life-income gifts provides a reliable payment stream to the income beneficiary, and one or more might appeal to and be appropriate for donors.

• A PIF is a pooled, mutual investment fund that holds contributions by several donors.
• A CGA is a contractual agreement under which your organization pays donors a fixed annuity for their lifetime.
• A CRAT is a separate tax-exempt entity that makes fixed annual payments to donors.
• A CRUT is a separate tax-exempt entity that makes variable payments to donors.

If a donor wants to support your organization and wants an income stream that can potentially grow as a hedge against inflation, but is not making a gift large enough to warrant the creation of a CRUT, a PIF is the next best choice. Typically, a client near retirement will make a gift to the PIF to claim a current income-tax charitable deduction while also providing future income.