Scholarships are a wonderful way to support promising and deserving students by assisting them with the cost of their education.
There are several ways of doing so.
You could contribute to existing programs within the school.
However, it could be that the family wishes to establish a named scholarship to honor a family member or someone else they desire to recognize.
In their case it makes sense to rely on the school or other charitable organization and its scholarship selection committee to advertise for qualified applicants and administer the scholarship.
A DAF (Donor Advised Fund) could be used as the funding vehicle. The DAF is a very powerful way to maximize giving and minimize income taxes. The DAF administrator along with you, the donor, and the school, agree to the terms of the scholarship agreement.
- Mr. Jones coordinates with xyz university to establish a scholarship in memory of his dad who was a long-time professor at the university.
- They agree on a target funding level, and the selection criteria that the selection committee would use in qualifying applicants.
- Each year the school’s selection committee administers the program and selects the scholarship awardees.
- Each year Mr. Jones recommends a grant from his DAF to the university to fund the scholarship rewards.
- Note that per IRS guidelines the donor in this example could serve on the committee but cannot be a deciding vote on identifying qualified applicants. Also, relatives of the donor cannot receive grants from the scholarship.
For more information about Donor Advised Funds see our Blog: “Donor Advised Funds (DAF) – a powerful way to cut taxes” on our website www.journeybeyondself.com. Or contact us if you have questions about this article or in other strategies to maximize your charitable giving.
Note it is recommended you coordinate this strategy with your tax adviser.