Pooled Income Funds

A pooled income fund combines the contributions of many donors into one fund, managed by a trustee. Each donor’s contribution is used to acquire “units” of the pooled fund (similar to purchasing shares of a mutual fund); for each unit, the donor or beneficiary receives a regular share of the fund’s net income for life. At the last beneficiary’s death, that portion of the pooled income fund is given to The Seattle Foundation, to be used according to the donor’s recommendations.

Joining the pooled income fund requires an initial minimum gift of at least $5,000. A donor may make additional contributions of $1,000 or more at any time afterwards. There are many tax advantages, including,

• The donor receives an income tax deduction in the year of any contribution. The amount of the deduction depends on the size of the gift, the number and ages of the beneficiaries and the fund’s top rate of return for the preceding three years. Deductions from cash gifts can be made up to 50 percent of adjusted gross income; deductions from appreciated property can be made up to 30 percent of adjusted gross income. Excess in both cases can be carried forward for up to five additional years.
• The donor pays no capital gains taxes when long-term appreciated securities are donated, making the fund an efficient way to convert low- or non-income-producing assets into increased cash flow.
• The donation helps eliminate or minimize estate taxes. Assets contributed to the fund are not subject to estate tax if the donor and the donor’s spouse are the only beneficiaries. If someone else is named as a beneficiary, a gift or estate tax deduction will be allowed for a portion of the contributed assets.

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