The Pooled Income Fund

Another option for donors who would like to make a gift to the UW Foundation but need income, especially those with appreciated securities, is the pooled income fund. A pooled income fund is very similar to a mutual fund.

To make such a gift, you sign a pooled income fund agreement and transfer cash or appreciated securities to the fund. Your gift purchases "units" in the fund based on the fair-market value of your gift and the current market value of fund units. Income from the pooled fund is distributed on a pro-rata basis to the beneficiaries you specify. Beneficiaries receive income for life. When the last beneficiary dies, the value of your units in the fund will be distributed to the UW Foundation and benefit any program you choose. You avoid capital-gain tax, if any, in the asset you use to make your gift.

For example, George and Mary Carlson purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. Now that they are both aged 65, they would like to augment their retirement income. To do this, they transfer the stock to the UW Foundation Pooled Income Fund which currently has a 3.5 percent payout rate.

In the first year, they will receive a $3,500 payment—more than two times the dividends they have been receiving—and those payments will increase in time if the assets of the pooled fund appreciate in value. Moreover, they avoid tax on their profit in the stock, and they receive an income-tax deduction of $47,828. In their 33 percent tax bracket, this saves them $15,783 in income taxes (33 percent of $47,828).

When the last beneficiary dies, the value of your pooled fund units will benefit any UW Foundation program you choose.

Back