Part 89

A donor receives many advantages from a contribution to the Scottish
Rite Foundation's Pooled Income Fund.

A great vehicle that allows people to obtain the tax-savings benefit of a charitable remainder trust with less investment risk and overhead, and with a smaller gift, is the Pooled Income Fund (PIF). The minimum contribution to the Scottish Rite Foundation, Southern Jurisdiction, USA, Inc.'s Pooled Income Fund is $5,000. But, exactly what is a Pooled Income Fund?

A PIF is a trust in which a number of donors "pool" their gifts and receive their proportionate share of the earnings derived from the investment of all of the assets in the pool. A donor irrevocably transfers funds or appreciated securities to the PIF (the PIF cannot accept real estate or tax-exempt property under IRS rules). The donor's contribution is combined with the assets given by all other donors to the fund and invested. The donor and any designated income beneficiary receive income payments from the PIF for their lives, based upon their allocated share of the dividends and interest earned by the whole PIF, exclusive of capital gains. In this respect, the PIF is similar to a mutual fund. Unlike a mutual fund, however, when the last income beneficiary dies, the charity receives any principal left in the donor's PIF account as an irrevocable gift.

Why consider a PIF? There are several benefits to the donor. First, the donor gets a charitable tax deduction in the year he or she makes the gift. The deduction is equal to the present value of the future gift passing to the charity, as determined by IRS regulations. The donor subtracts from the fair market value of the gift the present value of the income interest he gets from the donated assets (using the trust's three-year average rate of return). The actual amount of the deduction depends on the age of the income beneficiary and the size of the contribution. If the gift is money, the donor could deduct up to 50% of his/her Adjusted Gross Income (AGI). If the gift is appreciated securities, the donor could deduct up to 30% of his/her AGI. Any amount of the deduction that the donor cannot use in the year of the gift can be carried over for five years.

In addition to the charitable deduction, the PIF provides the donor and any income beneficiary with income each year. The amount of income each year is based on the annual rate of return of the PIF assets each year and the value of the donor's contribution as it relates to the total value of all contributions by all donors. By commingling the assets of all for investment, the PIF has sufficient funds to diversify its portfolio, reducing the donor's investment risk, enhancing the PIF's earning potential for all donors and, ultimately, increasing the amount of the charitable remainder gift.

Finally, a donor who contributes appreciated property to a PIF can bypass the long-term capital gains tax he or she might have had to realize in a market sale of that property. The value of the charitable remainder gift is based upon the fair market value of the property, not the cost basis. With a PIF, the charity, not the donor, will realize any gains on a later sale of property. For example, George Smith, age 80, and his wife, Alice, age 81, own stock with a value of $10,000 and a cost basis of $5,816. If George and Alice sold their stock, they would have to recognize a $4,184 capital gain. Instead, they donate the stock to the PIF, avoiding the $4,184 gain and saving potentially $387 of tax. The Smiths would get an income tax deduction of $4,959 based on the fair market value of the stock, their ages, and a 3-year rate of return for the trust of 7%. If their income tax bracket were 28%, they would save $1,388 in taxes. In addition, assuming a payout of 5% and assuming the trust earns 6% annually, the Smiths would get approximately $500 annually in income. Over the IRS presumed 12.5-year life expectancy, the Smiths would get total projected income of $6,623. So, over their lifetime, the Smiths would get a better return from the PIF than from a straight sale of their stock. Can you think of a better way to get a stream of income for life, avoid capital gains tax, get a tax deduction, and make a gift to your favorite charity for a minimum investment of $5,000?

If you would like more information on the Scottish Rite Foundation, Southern Jurisdiction, USA, Inc.'s Pooled Income Fund, or a free analysis of a contribution to the Pooled Income Fund, please fill out the coupon on page 29 or call us at the Development Office at 1-800-486-3331, ext. 143 or 163. Remember, we recently established a new Scottish Rite Foundation Pooled Income Fund, where you can make your local Foundation the remainder beneficiary of your gift.

Barbara Golden is the Director of Planned Giving for the Development Office of the Supreme Council. Barbara is an attorney with experience in tax, corporate, and commercial real estate law. She managed a non-profit legal services organization for several years and has extensive experience in fundraising, grant writing, and program operations.

To learn more about the Scottish Rite Pooled Income Fund, click here. For a chart illustrating Scottish Rite Foundation, S.J., USA, Charitable Gift Annuity Rates–Single Life, please click here.

Scottish Rite Foundations, Southern Jurisdiction Pledge Form

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Please print out and mail in the form below. Thank you.

Scottish Rite Foundations, Southern Jurisdiction Pledge Agreement

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Ill. Thomas M. Boles, 33°, G.C. (left in photo) has worked extensively in fund-raising for children's programs throughout our Fraternity. For more information on planned giving, call Bro. Tom at 562–691–4227 (Fax 562–691–5327) or the Scottish Rite Foundation, Southern Jurisdiction, U.S.A., at 202–232–3579, ext. 143. Ill. Earl E. Ihle, Jr., 33°, is our development team's Director of Major Gifts. He has been a member of the Fraternity for 25 years and served in 1978 as Master of Lafayette Lodge, No. 111, Baltimore, Maryland. He is also a member of Boumi Shrine Temple in Baltimore, the York Rite, and a dual member of the Scottish Rite Valleys of Baltimore and Washington, D.C. You can reach Bro. Ihle toll free at 1–800–486–3331, ext. 143.