Carnegie Mellon University

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Pooled Income Fund

A pooled income fund gift is an easy way to receive income for life and make a generous gift to Carnegie Mellon University at the same time.  A pooled income fund works like a mutual fund.  Your gift is combined  and invested with the gifts of other donors who contributed to the fund.  You receive payments that reflect 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 gains taxes on gifts of appreciated securities to the fund.
  • You want to make a generous gift to Carnegie Mellon.
  • You are considering a gift amount of $25,000 or more.

 

 
 

Features of a Gift to a Pooled Income Fund

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.  All of these assets are invested together.  Each donor is assigned units in the fund 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.  Payments are made quarterly.

Your payments will vary in amount with the performance of the fund.  If the fund increases its net income rate, your payments will increase.  If it decreases its net income rate, your payments will decrease.

You choose the income beneficiaries 
You decide who will get the payments from your pooled income fund gift.  Usually, the income beneficiary will be you, or you and your spouse.  You can, however, select anyone to receive the payments.  For example, you may wish to provide income for parents, a sibling, or a faithful employee. 

Tax benefits may include:

  • 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 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 all of 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.  Since, the fund will not pay any capital gains tax when it sells these appreciated assets.  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 the pooled income fund is fully taxable as ordinary income, just like interest income from a savings account. 

Remaining assets to Carnegie Mellon University
At the death of the last income beneficiary, the value of your share of the fund will be removed from the fund and become available to support Carnegie Mellon.

Add funds anytime
You can add to Carnegie Mellon's 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 Carnegie Mellon's 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.

Example

Kenneth and Marci Holmes are in their early 80s. They have been modest but faithful supporters of Carnegie Mellon University, 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 Holmess 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 Carnegie Mellon's pooled income fund and continue to receive about the same amount of income from the pooled income fund as their CD was earning.

In addition to receiving income for life, the Holmess will:

  • Receive an immediate income tax charitable deduction of $6,781 for the value of their gift.  Holmes will enjoy income tax savings if they itemize their deductions.
  • Make a generous legacy gift to Carnegie Mellon.