Pooled Income Funds

Alan and Susan had long been involved in charitable activities. Among other activities, they volunteered as ushers for the Symphony and spent time with several organizations helping those with disability challenges. The time they spent together helping others and enjoying world-class symphonic performances was intensely rewarding to them and they often wished they could do more.

Susan: "While we get personal satisfaction out of helping being involved, there is also some frustration. No matter what we do, there is always more that could be done."

Alan: "It would be wonderful to be able to not only physically pitch in, but also be able to just write a check or set up a trust or create a foundation to solve all these problems. But that's not who we are. We're just everyday folks, not wealthy or rich."

Susan: "One day we were talking with the development officer at the Symphony and he told us of a major gift they had just received, tens of thousands of dollars, through a trust some people had set up. I said, 'boy, I wish I could do that but the legal fees and setup costs would about wipe out what we could give.' He looked to see if I was serious and then said there is a way, called a pooled income fund."

Alan: "So we looked at the literature and then talked some more about it. And he was right, we could do it. We may not be rich, but the feeling we get from knowing what we can do makes us feel rich."

While a simplistic comparison, a pooled income fund might be considered the charitable equivalent of a mutual fund. Donors join a "pool" of other donors who commingle their donations (it is an irrevocable gift) in a pool of investments that is governed by a trust document that the charity establishes. Each donor has a proportionate share in the fund and new contributions (cash and or appreciated scecurities) can be made. The proportionate share of the fund's annual income is paid to each donor. On the death of the donor or the last income beneficiary, the percentage of the pooled income fund representing the donor's gift is withdrawn by the charity for its use.

A pooled income fund is an excellent way to make periodic contributions that will build into a sizable gift while avoiding fees and setup complexities. Using appreciated securities as a gift to a pooled income fund enables avoidance of capital gains taxes and the donor receives a charitable deduction for the gift value. The pooled income fund will provide income that will vary based on investment performance.