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. Philanthropy

    Charitable giving to human causes on a large scale. Philanthropy ...
  3. Charitable Remainder Trust

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

    A type of mutual fund comprised of gifts that are pooled and ...
  5. Charitable Donation

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

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  1. What are the advantages to structuring a business as a master limited partnership ...

    A master limited partnership (MLP) offers tax benefits for corporate entities that can reduce the cost of capital for capital-intensive ... Read Full Answer >>
  2. How do waivers, reimbursements and recoupments affect a fund's expense ratio?

    Waivers, reimbursements and recoupments can initially serve to keep a fund's expense ratio lower than it would be otherwise. ... Read Full Answer >>
  3. What are some popular mutual funds that give exposure to the drugs sector?

    The pharmaceutical industry has experienced outstanding growth in the 10 years leading up to 2015, consistently outperforming ... Read Full Answer >>
  4. What can cause the rate of return to be negative?

    Several factors can cause an investment to have a negative rate of return. Poor performance of a company or companies, turmoil ... Read Full Answer >>
  5. What information should I focus on in my mutual fund's prospectus?

    The U.S. Securities and Exchange Commission (SEC) requires investment companies to provide potential and current investors ... Read Full Answer >>
  6. How can I get a free mutual fund prospectus?

    Mutual funds are sold via prospectus, as mandated by the Securities Act of 1933. The prospectus document outlines many features ... Read Full Answer >>
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. Budgeting

    It Is Better To Give AND Receive

    You give to benefit others, but there can be perks for you too.
  4. Retirement

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  5. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  6. Mutual Funds & ETFs

    How Janus Capital Makes Money

    Before investing in Janus, it is prudent to understand how it makes money and what costs detract from shareholder wealth.
  7. Professionals

    Mutual Funds: How Many is Too Many?

    How many mutual funds are too many when it comes to a well diversified portfolio?
  8. Taxes

    Tips on Charitable Contributions: Limits and Taxes

    An overview of the limits and tax deductions of charitable donations.
  9. Investing Basics

    Understanding Redemption

    In the investing world, redemption refers to cashing out the value of bonds or mutual funds.
  10. Retirement

    Don't Make These Top 10 Mistakes On Your Roth IRA

    Don't lose out on the benefits of a Roth by contributing too much, breaking rollover rules or making other avoidable errors.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center