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. Fixed Income

    A type of investing or budgeting style for which real return ...
  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. Charitable Remainder Trust

    A tax-exempt irrevocable trust designed to reduce the taxable ...
  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. Investing Basics

    The Christmas Saints Of Wall Street

    Learn how some of world's richest people spread holiday cheer year-round.
  2. Taxes

    Deducting Your Donations

    Generosity may be its own reward, but some charitable giving also provides personal tax benefits.
  3. Retirement

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  4. Budgeting

    It Is Better To Give AND Receive

    You give to benefit others, but there can be perks for you too.
  5. Taxes

    How To Deduct All Of Your Charitable Donations?

    Donations made to charitable organizations can reduce your taxable income, thus your overall tax bill. But not all donations qualify to be deductable.
  6. Investing Basics

    What is the difference between a REIT and a real estate fund?

    A real estate fund invests in securities offered by public real estate properties directly or indirectly through Real Estate Investment Trusts (REITs).
  7. Taxes

    What is the difference between gross income and earned income?

    Being able to distinguish between earned income and gross income is an important tool in preparing for and filing your individual tax returns each year.
  8. Taxes

    What are the differences among gross income, adjusted gross income and modified adjusted gross income?

    Discover how calculating total taxable income is easier when gross income, adjusted gross income and modified adjusted gross income are fully understood.
  9. Taxes

    What is the difference between gross income and taxable income?

    Understanding common tax terms including gross income and taxable income can help individuals navigate tax accounting in an efficient way.
  10. Mutual Funds & ETFs

    Can you invest in hedge funds?

    Read about what it takes to invest in a hedge fund, and learn how some investors find ways to indirectly capture a hedge fund's returns.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center