Gift Plan Details: Pooled Income Funds

Pooled Income Funds have been out of favor for almost a decade now, largely because they distribute income only on a pro rata basis to pool participants. And, because dividend income and interest on fixed income instruments has remained historically low, people long since abandoned PIFs for Charitable Gift Annuities and other life-income instruments. Now that interest rates have dropped to historic lows, PIFs are even less appealing than they were before. As a result, this is a good time to offer people the chance to renounce their remaining income interest in PIFs in exchange for an additional charitable deduction or in exchange for an annuity.  In the latter case, since annuities are paying historically low rates right now, it seems like a relatively safe time to make the exchange

A pooled income fund operates like a charitable mutual fund.  Gifts from multiple donors are combined, invested and managed together in one trust.  Each quarter the fund pays the participants their proportional share of net income.  When the last beneficiary of a unit in the fund dies, the remaining balance in that unit is withdrawn from the fund and paid to your organization, to be used for the purpose the donor specified when the gift was made.    

Where a gift annuity offers stable fixed payments, distributions from a pooled income fund fluctuate quarterly, depending on the fund's performance.  Pooled income funds offer donors who do not wish, or cannot afford, to set up an individually managed charitable trust the benefits of professional investment management and diversification of their portfolio.

Because of additional administrative costs, pooled income funds are generally more expensive to manage than a set of gift annuities.  In addition, the current market trend of low interest rates means low yields for many pooled income funds: donors can often secure a higher payment rate from a charitable gift annuity than a pooled income fund.