A pooled income fund works much like a mutual fund, and requires a smaller initial investment than other income gifts. The primary investment objective of the fund is to balance income with growth. Your gift to the fund is invested with money contributed by other donors, and you receive a proportionate share of the fund's net income each year. The income you receive is based on the fair market value of your gift to the fund and is taxed as ordinary income. Your income tax deduction is based on the gift amount, the ages of the beneficiaries, and the highest annual rate of return of the fund during the previous three years.
Annuity trusts An annuity trust is separately invested and provides a fixed income.
An annuity trust is valued when the trust is established, and at least five percent of this amount is distributed quarterly to you or another beneficiary. You are not able to make additional contributions to an annuity trust, but you may establish a new one. Your income tax deduction is based on the amount of the gift, the ages of the income beneficiaries, and the percentage of trust assets received as income. Generally, the more income you receive, the lower your tax deduction. Unitrusts A unitrust is also separately invested and provides income that may vary from year to year.