When a donor contributes to the Life Income Funds, he or she is eligible for an immediate income tax deduction.
The donor's taxable estate will be reduced by the value of the contribution.
The donor's contributions are invested in the donor's choice of the funds, which are designed to generate quarterly variable income payable to the donor or the named beneficiaries.
Upon the death of the last income beneficiary, the remaining principal value is transferred to the Philanthropy Fund of America and granted to deserving nonprofits, taking into consideration the recommendations of the donor.
A donor is encouraged to consult with his or her tax advisor or accountant prior to finalizing a Donor Contribution Form. Tax benefits depend on the donor's individual circumstances. Selection of certain income beneficiaries may create a gift tax liability.
A pooled income fund is a trust that is established and maintained by a public charity. The pooled income fund receives contributions from individual donors that are commingled for investment purposes within the fund. Each donor is assigned "units of participation" in the fund that are based on the relationship of their contribution to the overall value of the fund at the time of contribution.
Each year, the fund's entire net investment income is distributed to fund participants according to their units of participation. Income distributions are made to each participant for their lifetime; after which, the portion of the fund assets attributable to the participant is severed from the fund and used by the charity for its charitable purposes. A pooled income fund could, therefore, also be described as a charitable remainder mutual fund.
A donor will receive an income tax charitable deduction for a portion of the value of a gift equal to the discounted value of the charitable remainder interest taking into account the life expectancy of the income beneficiaries. A donor can use the deduction up to 50 percent of his or her adjusted gross income (AGI) for gifts of cash, or 30 percent of AGI for gifts of appreciated assets, such as stock and real estate. The donor can use a deduction in the year the gift is made and carry forward any unused portion for up to five additional tax years. The donor's ability to take itemized deductions may be subject to certain other limitations. Donor should consult his or her tax advisor to determine tax deductibility limits.
Q: I have appreciated stocks and real estate with potential capital gains. How can I reduce or eliminate my capital gains taxes on these assets? A:
If a donor gifts stock or real estate to the Life Income Funds, the donor will receive a tax deduction for a portion of the value of the contribution, will eliminate or reduce capital gains associated with the value of the contribution and receive income for life or a term of years — all while supporting the charitable causes he or she wishes.
Q: What types of assets can a donor contribute to the Life Income Funds and how do I make a contribution? A:
The Life Income Funds accept cash contributions as well as contributions of more complex assets such as tradable securities, mutual fund shares or real estate.
Cash: A contribution of cash can be completed by check, wire or ACH funds transfer, with the submission of a completed Securities and Cash Donor Contribution and Authorization Form to the Trustee in accordance with the instructions on the form.The Trustee will not accept currency.
Securities: The Trustee will accept contributions of marketable securities such as mutual funds and stock listed on U.S exchanges.The Life Income Funds will not accept donations of tax-exempt securities or mutual funds that hold tax-exempt securities.Additionally, assets held for less than one year and certain other assets that may impact the tax-exempt status of the Philanthropy Fund are not acceptable.For more information on the completion of a securities donation read more under How to Donate Securities
Real Estate: All real estate must be reviewed by the Philanthropy Fund before it can be contributed. For more information on acceptable assets read more under Real Estate Contributions. In order to start the review process, please complete and submit the Real Estate Information Statement
Each pooled income fund will accept contributions from individuals, LLCs, LPs, trusts, estates, and others. However, the income interest must be created for the life or lives of natural persons.
Q: I'm not particularly wealthy, but I am charitable. How can the Life Income Funds help me? A:
Many planned giving vehicles, including charitable remainder trusts or foundations require significant setup costs and ongoing management requirements and expense. For many donors such vehicles carry too high of an expense burden for the amount they wish to give. The Life Income Funds provide a planned giving vehicle with relatively low expenses and no management requirements, providing the opportunity for those seeking to contribute lesser amounts in support of their charitable intentions, to do so in a simple and inexpensive manner.
A donor may contribute as often as he or she wishes. Some donors like to make multiple contributions to the Life Income Funds in order to name different beneficiaries for each. Others make regular contributions to build up their accounts and the ultimate donation to the Philanthropy Fund. The flexibility of the Life Income Funds lets the donor determine his or her giving timetable.
Q: Is there a minimum required contribution amount? A:
For contributions of cash and securities the minimum contribution requirement is $20,000 per pooled income fund. For contributions of real estate the minimum is $150,000 cumulatively across the funds and $20,000 per pooled income fund contribution. Each additional contribution will be treated separately and is required to meet the minimums.
Q: What about contributing from my retirement account? A:
It is important for a donor to speak with his or her tax advisor or attorney about a donor's personal situation. In general, during a donor's lifetime, whenever a donor takes money out of his or her tax-deferred account (IRA, 401(k), 403(b), etc.), the distribution is considered income to the donor and is a taxable event. Therefore, a donor would have to pay the taxes due upon the value of the distributed assets and then the remaining money would go to the charitable organization.
A donor may contribute to the Life Income Funds and direct the income stream to support his or her heirs by naming them as income beneficiaries. A donor has the ability to name up to two consecutive income beneficiaries or up to four concurrent income beneficiaries. Upon the passing of the final beneficiary the then current value of the contribution will pass to the Philanthropy Fund. The Philanthropy Fund will use the proceeds to support deserving nonprofits taking into consideration the recommendations of the donor.
The Life Income Funds consist of two series of trust and each series has four trusts with varying investment objectives. Please read more under Our Funds.
Q: Can planned giving help me diversify my assets? A:
If a donor is heavily invested in one stock or sector, or a single real estate asset, planned giving can help. A donor can make a gift of that investment to the Life Income Funds, eliminate or reduce the capital gains tax, take an income tax deduction for a portion of the gift, and benefit the deserving nonprofits. By doing so, a donor diversifies his or her sources of income in both a tax savvy and charitable way.
Q: What happens when the Life Income Funds receives my contribution? A:
When a contribution is received and accepted, the Life Income Funds will allocate the contributions across the chosen pooled income funds. Units will be issued on the business day (each day that the New York Stock Exchange is open for business) after the trustee for the Life Income Funds receives cash or the proceeds from the sale of the contributed assets, as well as the completed Donor Contribution Form.
Q: Will the Life Income Funds send me a receipt for my contribution? A:
Yes, the Life Income Funds will provide written confirmation of your contribution as well as a good faith estimate of a donor's available tax deduction. This good faith estimate will serve as a donor's receipt for tax purposes. For donations of real estate or securities in excess of $5,000 all donors must present a receipt as well as a completed Form 8283 with his or her federal tax return. The Life Income Funds will assist the donor in the process of completing an appropriate Form 8283.
That income will be variable depending on market conditions and the performance of the funds. On a quarterly basis, the Life Income Funds will distribute to the income beneficiary 100% of the interest, dividends and other ordinary income it receives. Long-term capital gains and unrealized appreciation cannot be distributed.
Yes. The income received is taxable to the income beneficiary as ordinary income. A pooled income fund cannot own tax-free municipal bonds. Each year in early March, a donor will receive a 1041 Form K-1 that will give the donor the information he or she needs for tax returns.
