Pooled Investment Funds

We are currently in a charitable crisis.   Charities are facing increased need for services, rising costs, increased competition, smaller market share, lower donations, and reduced grant support.  Small to mid-size Charities are particularly vulnerable to these issues.  Legacy addresses these problems through Legacy’s Partner-In-Philanthropy program and Legacy Pooled Income Funds (PIFs).

PIFs are commonly used by large Charities such as universities in securing perpetual institutional funding.  The complexities of PIFs have kept this planning vehicle out of the reach of mid-size or smaller Charities.  With the Legacy PIF, this level of planning is now available to Charities of all sizes.

A PIF is a Trust established and maintained by a public charity, such as Legacy.  A PIF operates much like a mutual fund and is not a tax-exempt entity.  PIFs have numerous Donors and Charitable Beneficiaries.  Donors and Charitable Beneficiaries both participate in the benefits of the PIF.  Donors receive lifetime income.  Charitable Beneficiaries receive the residual values of the PIF upon a Donor‘s death.  These benefits are based on the pro-rated shares of the fund allocated to each Donor and each Charitable Beneficiary.

Under applicable rules, a PIF pays out variable income to Donors based on the net investment return of the Fund.  The principle is retained in the Fund.  This protects Donors from a potential decrease in the value of overall lifetime income that could occur as a result of a bad investment year.  It also allows for income to perpetually grow in alignment with net investment returns.  The PIF rules protect the interests of both Donors and Charitable Beneficiaries.

Pooled Income Fund Diagram

Legacy offers several options for investment of funds donated to a Legacy PIF.  Donors may elect at the time of the gift which investment option is right for them.  Investment options may include: Impact Investments, traditional Investment Portfolios, Private Equity Investments, Annuity and Insurance Portfolios, and various Managed or Dimensional Funds.

Reasons a Donor may choose a Legacy PIF:

  • Tax Advantages.  With a PIF, the gift of an appreciated asset relieves the Donor completely of any tax on associated capital gains.   In contrast, with a Charitable Gift Annuity, income to the Donor may include capital gains taxation on the value of the appreciation of the gifted asset.
  • Immediate Deduction.  The estimated residual charitable gift is projected to be relatively high.  This means that the immediate income tax deductions may be significantly higher than alternative types of Split Interest Gifts.

Reasons for a Charity to choose a Legacy PIF:

  • Charitable Residue.  Participating Charities can enjoy the benefits of a PIF without managing the administrative overhead and compliance.  Legacy takes care of administration and compliance so that participating Charities can focus on their charitable mission.  With a PIF, the principle is never distributed.  This means that  depending on the rate of growth, the eventual charitable residue for your organization may be more than the original contribution amount.