Photo by Claudio Schwarz on Unsplash

Question:

A friend’s nephew recently passed (suddenly and tragically) and she wants to set up a scholarship fund (so far about $80k raised).

She is looking for an attorney referral to help her with the process.  I am not sure an attorney is really needed but also don’t know anything about the process.

Response:

A lot depends on what your friend wants to do. She may not need an attorney at all, though it may help to have a consult with an estate planning attorney to talk through the options. She needs to think about the purpose of the fund. Is it related to a particular school or community? Who might apply? Is it to help a student pursue a particular field of study? Who will determine who receives the awards and how much they are?

Depending on the answers, he scholarship might be structured differently. The fund is too small to justify the cost and administrative burden of creating a charity or charitable trust. However, she could create a non-charitable trust administered by a small group of trustees. Such a trust would have to file an annual income tax return and further donations to it would not qualify for the charitable tax deduction.

However, given the relatively small amount of the fund, my thinking is your friend would be best off collaborating with an existing institution, such as a school or community organization, that can administer the fund and award the scholarships. Together, they can answer many of the above questions about who will award the scholarships, the amount to be given out each year, and the criteria for winning the award.

Related Articles

Creating a Private Foundation or Using a Donor Advised Fund Charitable Remainder Trusts Gifting Appreciated Property to Charities Can Provide Substantial Tax Benefits