A type of mutual fund, a pooled income fund occurs when numerous assets are pooled together within a single fund for the ultimate benefit of charity. During the donors’ lifetimes, income is given to them from the fund. After the donors have passed on, the assets pass on to charity. A pooled income fund therefore manages the assets of many individuals.
Because none of the individual donors are responsible for the assets, a pooled income fund needs its own Tax ID. Otherwise known as an Employer Identification Number, a Tax ID is what identifies any discrete, taxable entity to the IRS. A pooled income fund will manage its own taxes, and donors will only be responsible for taxes regarding the income that they take in. Consequently, pooled income funds are often used both for charitable purposes and for the purposes of tax management.
A pooled income fund makes it possible for donors to gain the benefits of their assets during their lifetime but still leave these assets to charity once they’ve passed on, and is a valuable form of estate planning.