8097 / What is a pooled income fund?

A pooled income fund is a trust maintained by the charity into which each donor transfers property and from which each named beneficiary receives an income interest. The amount of the income is determined by the rate of return earned by the trust for the year. The remainder interest ultimately passes to the charity that maintains the fund.¹

All contributions to a pooled income fund are commingled, and all transfers to it must meet the requirements for an irrevocable remainder interest. The pooled income fund cannot accept or invest in tax-exempt securities, and no donor or beneficiary of an income interest can be a trustee of the fund.²

Special rules apply to contributions (if permitted) of depreciable property. A pooled income fund that is not prohibited (either under state law or its governing instrument) from accepting contributions of depreciable property must (1) establish a depreciation reserve fund with respect to any depreciable property held by the trust; and (2) calculate the amount of depreciation additions to the reserve in accordance with generally accepted accounting principles.³ The purpose of these requirements is to ensure that the value of the remainder interest is preserved for the charity.⁴