Pooled Income Funds (PIFs) and Donor Advised Funds (DAFs) continue to be strong, smart charitable giving solutions for high-net-worth clients. Alliance Community Foundation (ACF) has been delivered an especially successful platform for these approaches. ACF is a pass-through community foundation providing highly customized, legally permissible, and innovative planned giving agreements, especially for Pooled Income Funds and Donor Advised Funds. Alliance is one of the very few charities that have been established to be donor facing and advisor facing as opposed to mission critical. This allows them to be extraordinarily flexible in structuring their gifting vehicles.
Dan Rice serves as ACF’s President, CEO and Chairman. At the turn of the new year, I asked Dan to share ACF’s highlights of 2021 and what he sees going forward in 2022. Here’s what he had to say:
If a charitable community foundation told you that they grew by over $100 million in 2021 and that all of this growth occurred in just one type of planned giving vehicle, what would you guess that vehicle was? If you guessed it was the Donor Advised Fund, you would probably be correct. However, in 2021, it was the Alliance Community Foundation’s Pooled Income Funds that grew by over $100 million.
Most PIFs accept only gifts of cash or publicly traded securities. ACF has a much broader gift acceptance policy which allows donors greater flexibility in their gifting strategy. Over half of all the new 2021 Pooled Income Funds received donations of closely-held business securities in companies owned and managed by the donors.
The “young” Pooled Income Fund rate (less than 3 years old, which allows it to use the federally published “discount rate”) dropped from 2.2% in 2021 to 1.6% in 2022. Example: In 2021, a couple both 65 years of age, who funded a PIF with $1 million, would have received a deduction of $616,400. In 2022, the deduction would be $700,900. The PIF approach maximizes the charitable deduction.
Which would your 65-year-old couples prefer? To donate $1 million to a Donor Advised Fund and receive a $1 million deduction, or donate $1 million to a Pooled Income Fund and receive a $700,900 deduction? Many advisors and clients will default to the DAF but the PIF is an attractive alternative since the deduction is relatively large AND the donor receives income for the rest of their lives