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§ 5.3 PLANNED GIFTS: CORE CONCEPTSConsequently, the key to wise charitable giving is to give property that islong-term capital gain property and that has substantially appreciated in value.The greater the appreciation, the greater the charitable deduction and otherincome tax savings. The appreciated-property gift is, therefore, a fundamentalconcept of planned giving.§ 5.3 PLANNED GIFTS: CORE CONCEPTSThere are two basic types of planned gifts. One type is made by means of a will,whereby the gift is derived from a decedent’s estate (as a bequest or devise). Theother type involves a gift made during the donor’s lifetime, using a trust orother agreement.These gifts are sometimes called deferred gifts, because actual receipt of thecontribution by the charity is deferred until the happening of some event (usuallythe donor’s death). But the term deferred giving has fallen out of favor, assome donors (to the chagrin of the gift-seeking charity) are under the impressionthat it is their tax benefits that are being deferred.A planned gift usually is a contribution of a donor’s interest in money or anitem of property, rather than an outright gift of the entirety of the money orproperty. (The word usually is used because gifts using insurance do not neatlyfit this definition and because some treat an outright gift of property through anestate as a planned gift.) Technically, this is a gift of a partial interest in property.Thus, planned giving usually is partial interest giving. 6 Further, an item of propertyhas within it two interests. an income interest and a remainder interest.The income interest within an item of property is a function of the incomegenerated by the property. A person may be entitled to all of the income from aproperty or to only some portion of the income; for example, income equal to 6percent of the fair market value of the property, even though the property is producingincome at the rate of 9 percent. This person is said to have the (or an)income interest in the property. Two or more persons (such as husband and wife)may have income interests in the same item of property, and these interests maybe held concurrently or consecutively. An income interest is capable of beingaccorded a present value at the time the interest is created.The remainder interest within an item of property is the projected value of theproperty, or the property produced by reinvestment, at some future date. That is,the remainder interest in property is an amount equal to the then value of theproperty (or its offspring) when it is to be received at a subsequent point in time.As an illustration, if A gives B a portfolio of securities, telling B that he or shecan hold the securities for a period of 10 years and have the income from theportfolio during that time, following which the securities must be returned to A,B has the income interest in the securities and A has the remainder interest.6 The general rule is that a gift of a partial interest in property to a charitable organization, made by a form otherthan a trust, is not deductible as a charitable contribution. IRC § 170(f)(3)(A). The three exceptions to this rule(IRC § 170(f)(3)(B)) are discussed in § 9.6 and Chapter 15. A charitable contribution of a partial interest (remainderinterest) in trust must, to be deductible as a charitable gift, be made by means of a charitable remaindertrust or pooled income fund. IRC § 170(f)(2)(A); see Chapters 12 and 13. A charitable contribution of a partialinterest (income interest) in trust must, to be deductible as a charitable gift, be made in accordance with IRC§ 170(f)(2)(B). See Chapter 16. 147