Estate planning isn’t just about passing down wealth. It can also be a way to express values, and support causes you care about. For many, creating a scholarship fund accomplishes both — helping future generations afford college while offering strategic tax advantages.
Why Scholarships Make Sense in Estate Planning
Donating part of your estate to a scholarship fund helps lower the value of your taxable estate. If your assets exceed the federal or state estate tax thresholds, you may be eligible for significant savings.
Beyond the tax benefits, scholarship funds provide personal fulfillment. They offer a way to:
- Honor a loved one
- Support students from specific communities or backgrounds
- Promote fields of study aligned with your passions or profession
Families often find this kind of giving deeply meaningful, especially when the impact is visible over time.
How to Set Up a Scholarship Fund
There are several ways to create a scholarship fund. Some donors work directly with a university, setting eligibility criteria and funding guidelines through the school’s development office. Others prefer working with community foundations or national organizations that manage scholarships on behalf of the donor.
You’ll need to define:
- The amount you wish to donate
- Whether the scholarship is one-time or renewable
- What type of student qualifies — academic merit, financial need, field of study, etc.
Working with a legal and financial advisor helps ensure that the scholarship is set up in a way that aligns with IRS rules and your estate goals.
Use Charitable Trusts for Long-Term Giving
If you wish to provide an ongoing scholarship, a charitable trust may be an appropriate option. These trusts can be structured to distribute funds to educational institutions over time, while offering lifetime income or tax advantages to you or your heirs.
Options include:
- Charitable remainder trusts, which provide income to the donor or beneficiaries and donate the remainder to charity
- Charitable lead trusts, which give income to a scholarship fund for a set period before passing remaining assets to heirs
Both options offer estate tax benefits and facilitate structured philanthropic giving.
Keep Estate Planning Documentation Clear and Updated
Scholarship gifts should be formally documented in your estate plan. This includes specifying the donation amount, naming the institution or fund and detailing the gift’s intended purpose.
If your estate includes a charitable trust or scholarship language in a will, your attorney can ensure that the documents reflect current laws and your latest wishes. Schedule a consultation today to protect your legacy and your vision for the next generation.
Key Takeaways
- Scholarships reduce estate taxes: Donating part of your estate to education can lower taxable value, while doing good.
- Funds can reflect personal values: Scholarship criteria can honor a loved one, support your alma mater, or advance a chosen cause.
- Trusts provide long-term support: Charitable trusts allow for structured giving with additional financial benefits.
- Clear documentation is essential: Legal language must align with your goals and estate plan to avoid confusion or misdirection.
Reference: Charles Schwab (June 6, 2025) “How to Start a Scholarship Fund”