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Pooled Income Funds
A pooled income fund is another form of a split interest trust. Money or property is contributed to the fund which assets are commingled with the property contributed by all other donors. In return for the contribution, the donor receives an income interest in the trust payable quarterly for life. The closest analogy to the pooled income fund is a mutual fund. Gifts to a pooled income fund are irrevocable.
Details of a pooled income fund:
- Donors to the pooled income fund acquire "units" of participation in the fund.
- The number of units acquired depends upon the unit value of the fund at the time of acquisition.
- The value of the unit fluctuates, depending upon market conditions, and the investment performance of the fund.
- The income distributed to the beneficiaries depends upon the income earned in the fund. All of the income is distributed to beneficiaries each year and is distributed proportionately based upon the number of units each beneficiary holds. All income received by the beneficiaries is taxable.
- PIFs are unlike mutual funds in that: (1) units cannot be sold or withdrawn and (2) when the beneficiary dies, the value of his units is distributed to charity.
Benefits of a gift to a pooled income fund:
- Capital gains bypass
- Lifetime income
- Charitable deduction
The minimum gift size is $10,000 for an initial contract and $5,000 for subsequent gifts. The minimum age of the income beneficiaries is 50 and the maximum number of income beneficiaries is two.
