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Pooled Income Fund
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A pooled income fund gift is an easy way to receive income for life and make a generous gift to Bates College. A pooled income fund works like a mutual fund. Your gift is combined with the gifts of all other donors to the fund and invested together. You receive payments equal to your share of the fund's net income.
A pooled income fund gift may be right for you if:
- You want income payments for life.
- You want the opportunity for income growth.
- You itemize your tax deductions and want to save income taxes
- You want to avoid recognition of capital gain taxes on gifts of appreciated securities to the fund.
- You want to make a generous gift to Bates.
- You are considering a gift amount of $5,000 or more.
How Your Gift Helps
Your gifts to Bates College help to educate the whole person through creative and rigorous scholarship in a collaborative residential community. It will provide Bates College with the resources to…
engage the transformative power of our differences, cultivating intellectual discovery and informed civic action;
prepare leaders sustained by a love of learning and a commitment to responsible stewardship of the wider world;
stand firmly for the ideals of academic rigor, intellectual curiosity, egalitarianism, social justice and freedom.
Gifts pooled together
A pooled income fund functions like a mutual fund. When you make a gift to our pooled income fund, your gift is combined with the gifts of all other donors to the fund. The pooled income fund invests all of its assets in a common fund. The fund assigns units to each donor that reflect his or her share of the fund's total assets.
Payments based on fund income
Each year, the pooled income fund distributes all of its net income to its participants. The amount of income you receive is proportional to your share of the fund. For example, if you have a 1/10th share of the fund and the fund earns $1,000 of net income the fund will pay you $100. The fund makes payments quarterly and continue for the life of each participant.
The pooled income fund is typically invested for total return. The fund investments produce income but the fund is also invested so that the principal appreciates. As the value of the fund investment portfolio grows, that leads to gradually increasing levels of income. If the value of the fund’s principal increases over time, your payments generally will increase. If the fund investments decrease over time, your payments generally will decrease.
Remaining assets to Bates College
When your pooled income fund gift ends, the value of your share of the fund will be removed from the fund and become available to support Bates.
Who can receive payments?
You decide who will get the payments from your pooled income fund gift. Usually, this will be you, or you and your spouse. You can, however, select other people to receive the payments. For example, you may wish to provide income for parents, a sibling, or a faithful employee.
How long do payments last?
Payments last for the lifetime of each payment recipient.
A pooled income fund gift is an irrevocable arrangement. Once you make a gift to our pooled income fund, you cannot change your mind and get the assets back. This requirement assures that the portion of the fund’s value attributable to your gift will go to support Bates when your arrangement ends.
- Earn an immediate income tax charitable deduction that will save income taxes if you itemize deductions.
- Avoid capital gains tax.
- May reduce estate taxes if your estate exceeds the then applicable estate tax credit.
- You may reduce and probate costs.
You will receive tax savings from an income tax charitable deduction if you itemize your deductions in the year of your gift. If you cannot use the entire deduction that year, you may carry forward your unused deduction for up to five additional years.
If you give appreciated securities to make your pooled income fund gift, you will not pay any capital gains tax when you make your gift. In addition, the fund will not pay any capital gains tax when it sells these assets. This means that the fund will be able to reinvest the full value of the assets you donate. By removing the gift assets from your estate, you may also reduce estate taxes if your estate exceeds the then applicable estate tax credit. You may also reduce probate costs when your estate is settled.
Taxation of payments
The income you receive from our pooled income fund is fully taxable as ordinary income, just like interest income from a savings account.
Add funds anytime
You can add to our pooled income fund anytime. Additions earn an additional income tax charitable deduction that can save you income taxes if you itemize. You will also increase your future payments from the fund.
Assets to consider giving
The following assets make excellent sources for making a gift to our pooled income fund:
- Cash that you currently have in a savings account, bank CD, money-market fund, or other safe but low-yielding investment.
- Securities, especially highly appreciated securities. (You may not contribute tax-exempt securities to a pooled income fund.)
Raymond and Teresa Kirkpatrick are in their early 80s. They have been modest but faithful supporters of Bates College, having given $5,000 each year for many years. They would like to make a larger commitment, but are concerned about maintaining their income.
The Kirkpatrick's own a $25,000 CD that will mature in a few weeks. They are pleased to discover that they can donate the $25,000 to our pooled income fund and continue to receive about the same amount of income from the pooled income fund as their CD was earning. Moreover, if the pooled fund investment portfolio increases in value, their income could increase in the future.
In addition to receiving income for life, the Kirkpatricks will:
- Receive an immediate income tax charitable deduction of $15,083 for the value of their gift. Kirkpatrick will enjoy income tax savings if they itemize their deductions.
- Make a generous legacy gift to Bates.