How to Start a Scholarship Fund in Memory of Someone

Establishing a scholarship fund in memory of a loved one creates a lasting tribute, transforming grief into a tangible legacy that supports future generations. This fund allows the honoree’s values and life’s work to continue influencing the world by empowering students. Creating such a fund is a personal and impactful way to commemorate a life while contributing to societal advancement. This guide explores the practical steps for creating a memorial scholarship.

Initial Planning for Your Scholarship

Before initiating formal procedures, define the scholarship’s core vision. This involves connecting the scholarship’s purpose directly to the individual being honored, reflecting their passions, achievements, and values. For example, if the honoree was a nurse, the scholarship might support students pursuing nursing degrees, extending their impact in a cherished field.

Identifying specific goals clarifies the scholarship’s direction and impact. This includes determining the fund’s “why,” such as supporting students in particular fields of study, assisting specific demographic groups, or fostering certain skills. Clear goals guide all subsequent decisions about the scholarship’s design and administration.

Establishing precise criteria for eligible recipients ensures the scholarship reaches those who best align with its purpose. Considerations include academic merit, financial need, specific backgrounds, geographic location, or chosen fields of study. Defining these parameters at the outset streamlines application and selection processes.

Decide on the scholarship amount and frequency, considering whether awards will be one-time or recurring, and if they will cover full tuition or serve as supplemental aid. Factors like anticipated fund size and the number of students supported influence these decisions. Determining the fund’s duration, whether perpetual or limited-term, impacts its long-term financial planning. This stage also involves considering who will oversee the scholarship’s development, often close family members or friends dedicated to upholding the honoree’s memory.

Choosing a Fund Structure

Selecting the appropriate legal and administrative structure is a decision for establishing a scholarship fund. Each option has distinct requirements and implications for management and oversight. Understanding the information needed for each structure is important before formalizing arrangements.

Independent Non-Profit Organization

Forming an independent non-profit, typically a 501(c)(3) public charity, provides control over the scholarship’s operations and criteria. This path requires:
Proposed board members’ names and contact details.
A clear mission statement outlining the scholarship’s purpose.
Identification of a registered agent within the state.
Drafting initial bylaws governing the organization’s internal operations.

Donor-Advised Fund (DAF)

Establishing a DAF through an existing sponsoring charity, such as a community foundation or university, offers a simpler approach. To set up a DAF, provide:
The desired name for the fund.
The initial contribution amount.
Preferences for grant recommendations.
Understanding the sponsoring organization’s application forms and requirements is also necessary.

Educational Institution Partnership

Partnering directly with an educational institution allows the institution to manage administration and selection. This collaboration requires details for an endowment agreement, specifying how funds will be managed and disbursed. Institutions often have minimum contribution requirements for endowed funds and will need specific criteria aligning with their existing scholarship programs.

Private Trust

A private trust can also serve as a vehicle for a scholarship fund, providing a flexible structure managed by a trustee. For this option, discussions with a legal professional will require:
Names of appointed trustees.
Specific terms and conditions for awarding scholarships.
Defining the trust’s duration.
This structure offers customization for specific scholarship objectives.

Establishing and Funding the Scholarship

Formalizing the chosen scholarship structure involves specific procedural steps. Each structure has a distinct path to official establishment and operation, transforming the conceptual plan into a functioning entity.

Independent Non-Profit

For an independent non-profit, the process begins with filing Articles of Incorporation with the Secretary of State in the chosen state, typically incurring a filing fee ranging from $50 to $300. After state approval, the organization must apply for an Employer Identification Number (EIN) from the IRS, a free online process. The final step in achieving tax-exempt status involves submitting IRS Form 1023. This detailed application can take three to twelve months for approval and may involve user fees ranging from $275 to $600 depending on gross receipts.

Donor-Advised Fund (DAF)

Establishing a DAF is less complex. This involves submitting completed DAF application forms to the chosen sponsoring organization and making the initial contribution. The sponsoring organization handles investment management and grant distribution, simplifying the administrative burden. Initial contribution amounts vary, with many DAF providers requiring a minimum of $5,000 to $25,000 to open an account.

Educational Institution Partnership

Formalizing a partnership with an educational institution generally involves signing a scholarship or endowment agreement. This document outlines the fund’s terms, including contribution schedule, scholarship criteria, and reporting requirements. Initial contributions are then made directly to the institution as specified in the agreement, often as a lump sum or over a set period.

Private Trust

For a private trust, the procedural step involves drafting and executing the trust documents with legal counsel. This creates a legally recognized entity capable of holding assets and distributing funds according to its terms. The trust is then funded by transferring assets, such as cash or securities, into the trust’s name.

Funding Strategies

Various strategies can fund the scholarship continuously:
Direct donations from individuals, families, and corporations.
Organizing fundraising events, such as charity dinners or memorial walks.
Online crowdfunding platforms.
Directing memorial contributions received after a loved one’s passing to the scholarship fund.

Operating Your Scholarship Program

Once the scholarship fund is established and funded, ongoing operations focus on selecting recipients and disbursing awards. This phase requires careful management to ensure the scholarship’s objectives are met. The process begins with designing and implementing a clear application system.

Application Process

Developing a robust application process attracts qualified candidates. This includes determining required documents, such as:
Academic transcripts.
Letters of recommendation.
Personal essays.
Many scholarship programs utilize online portals for streamlined application submission and review, making the process accessible to a broader pool of potential recipients.

Recipient Selection

The recipient selection process typically involves forming a selection committee, often composed of family members, community leaders, or educational professionals. This committee reviews applications against established criteria, which may include academic performance, financial need, community involvement, or specific career aspirations. Review ensures awards are granted to individuals who best embody the scholarship’s purpose.

Notification and Disbursement

Notifying selected recipients and disbursing funds are important steps in the scholarship cycle. Award notifications typically include details about the scholarship amount, terms of acceptance, and next steps. Scholarship funds are commonly disbursed directly to the educational institution on behalf of the student, or in some cases, directly to the student, depending on the fund’s policies and the institution’s requirements. This direct payment helps ensure funds are used for educational expenses.

Financial Management

Ongoing financial management is important for the scholarship fund’s longevity and compliance. This involves meticulous record-keeping of all contributions and disbursements. Depending on the fund’s structure, annual reports may be required for transparency, and tax filings, such as IRS Form 990 for non-profits, are mandatory to maintain tax-exempt status.

Promotion

Promoting the scholarship program is important for reaching eligible applicants. This can involve:
Collaborating with high school guidance counselors, university financial aid offices, or local community organizations.
Utilizing social media, dedicated websites, and local media outlets to broaden reach and attract deserving students.

Citations

https://www.irs.gov/charities-non-profits/charitable-organizations/how-to-apply-for-501c3-status
https://www.irs.gov/charities-non-profits/form-1023-user-fee-information
https://www.fidelitycharitable.org/guidance/charitable-giving-strategies/donor-advised-fund-minimum.html
https://www.irs.gov/charities-non-profits/annual-reporting-and-filing-requirements