No stranger to philanthropy, Michael Jordan made the ultimate gift in honor of his 60th birthday—a $10 million donation to the Make-A-Wish Foundation. The record-setting donation is the largest individual contribution the organization has ever received.
Jordan has been supporting the foundation since 1989, having donated over $5 million prior to this most recent gift. He’s also one of the most popular celebrity wish requests that the organization receives. According to a press release by the organization, Jordan said he “can't think of a better birthday gift than seeing others join” him in supporting the foundation and that he hopes the donation will allow “every child” to “experience the magic of having their wish come true.” Jordan’s donation will create an endowment to provide the funds needed to make future wishes possible for kids with critical illnesses.
Per Forbes, Jordan is worth some $1.7 billion, with his net worth coming from his ownership of the NBA’s Charlotte Hornets and his nearly $2 billion in lifetime earnings from Nike and other corporate partners.
Lifetime Philanthropic Gifts
Make-A-Wish is a cause near and dear to Jordan’s heart, and it’s likely that he wasn’t primarily motivated, if at all, by tax reasons for his philanthropy. But, how are lifetime philanthropic contributions treated for tax purposes? “A lifetime philanthropic contribution made to a qualified charitable organization can produce income tax savings for the donor by generating an income tax deduction, which reduces the amount of the donor’s income that’s subject to income tax,” says Stefanie J. Lipson, partner at Greenberg Glusker in Los Angeles. “However, the charitable deduction for an individual donor isn’t unlimited and can’t completely eliminate a donor’s income tax in a particular year. The maximum possible deduction is capped at 60% of the donor’s adjusted gross income—this 60% limitation, though, is applicable to a narrow category of contributions (generally, cash donated to a public charity) and is temporary and expires at the end of 2025, when the maximum possible deduction will revert to 50%.”
Transfer at Death?
Would Jordan have been better off taxwise if he instead planned for this donation as a transfer at death? “From a pure tax lens, a lifetime contribution to charity has two potential tax benefits, whereas most bequests on death have one tax benefit,” explained Lipson.
A lifetime contribution to charity reduces the value of the donor’s estate by the same $1 million as a transfer at death. However, “the lifetime gift also creates the opportunity for a current income tax deduction for the donor, reducing the amount of income that the donor would otherwise pay income tax on, allowing an added tax benefit from the donor’s current philanthropy,” added Lipson.
One of the factors that goes into deciding whether to make a lifetime or at death transfer gift is whether the donor wishes to part with the assets during their lifetime. Some donors may have a hard time doing so while others would prefer “to see their generosity put to use by the charitable organization during their lifetime,” posits Lipson.
Tax incentives and/or benefits are often part of a discussion when making a charitable gift, but usually aren’t the driving force behind the altruistic spirit of the donor. The donor’s desire to make a lasting impact or change and inspire others to do the same, as is likely in the case of Jordan’s recent contribution, are at the forefront.