Life Income Plan

AAA

DEFINITION of 'Life Income Plan'

A type of philanthropic strategy where cash or property is transferred into a pooled income fund sponsored by the receiving charity in return for a lifetime of guaranteed income for the donor. The charity assumes full control and ownership of the donated assets upon the donor's death or upon the death of the last named beneficiary.

Life income plans are generally appropriate for wealthy investors with large estates seeking an immediate tax deduction, although some charities specify a minimum initial contribution of as little as $5,000.

INVESTOPEDIA EXPLAINS 'Life Income Plan'

In most life-income-plan arrangements, the charity will determine how much of a present tax deduction the donor is entitled to and notify the donor accordingly. Life income plans are similar in nature to charitable remainder trusts, except that a pooled income fund is used for the former. The pooled income fund usually consists of a portfolio of fixed-income securities, and the trustees of such funds manage them to provide income and preserve or increase the principal.

RELATED TERMS
  1. Charitable Remainder Trust

    A tax-exempt irrevocable trust designed to reduce the taxable ...
  2. Pooled Income Fund

    A type of mutual fund comprised of gifts that are pooled and ...
  3. Philanthropy

    Charitable giving to human causes on a large scale. Philanthropy ...
  4. Fixed Income

    A type of investing or budgeting style for which real return ...
  5. Charitable Donation

    A gift made by an individual or an organization to a nonprofit ...
  6. Historic Pricing

    A method for calculating the value of an asset using the last ...
Related Articles
  1. Celebrate the season of giving by sharing a little bit of your prosperity with the people, animals and causes that really need your support.
    Investing Basics

    The Christmas Saints Of Wall Street

  2. Taxes

    Deducting Your Donations

  3. Retirement

    Navigating Government And Nonprofit ...

  4. Budgeting

    It Is Better To Give AND Receive

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center