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Question:

We would like to set up a scholarship fund in memory of our grandfather, a Vietnam War veteran. What’s the best way to go about doing this?

Response:

A lot depends on what you have in mind in terms of recipients and association with any school. If you want the funds to go to students at a particular school, whether a high school or college, it makes sense to get in touch with the institution and work within their existing structure. This has a few possible advantages. They may help in choosing the recipients and also may manage the funds. It can also offer continuity so the scholarship can continue when you and other family members can no be involved in choosing recipients.  You and others may even receive a charitable deduction for making contributions to the fund.

You might also want the scholarship to be associated with a particular non-educational purpose or nonprofit organization. In your case, since you mention your grandfather’s veteran’s status, you may want the scholarship to go to a veteran or to be sponsored by a veterans organization. In either case, I would recommend working with an existing organization that could help administer the scholarship, manage the funds, and with outreach to candidates for the scholarship.

If neither approach, working with an educational institution or other organization, is appropriate in your case or you would like more control over the scholarship, you can set up an independent trust to administer it. It would most likely be irrevocable and not benefit from any charitable tax deduction. But you could set the terms for administering the funds, giving out scholarships, choosing trustees and filling vacancies as they occur. The trust will have to file an annual income tax return, but otherwise there should not be substantial administrative burdens or costs.

So, I’d recommend working with an existing organization if possible, but if not setting up a trust to administer the scholarship.

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