Creating A Scholarship
This "Creating a Scholarship" page was prepared by William "Bill" Baker and is dedicated as a tribute in loving memory of his beloved daughter, Kelly Elizabeth Baker of Fairfax Station, Virginia.
Memorial Scholarship Awards
(The information below is based on the personal experiences of William "Bill" Baker and his wife, Andi, in creating scholarships in memory of their daughter, Kelly Elizabeth. Bill generously created this summary based only on his personal experiences. This information should merely be considered a starting point for consideration to anyone interested in this topic. A qualified attorney, certified public accountant, and/or financial planner should be consulted before deciding whether to establish any such scholarship.)
Remembering your child through a Memorial Scholarship Foundation can be a rewarding experience for the recipient and the donors. It allows your child's name to be a conduit for a student to further their education and/or other purposes and it allows the donors the sense of accomplishment in helping you achieve your intended goal.
First and foremost, goals need to be identified to determine the type of Scholarship Foundation you desire. For example, what do you want to name the Fund, what type of Fund best meets your goals, will the Fund be targeted for a senior student, a continuing college student in a specific curriculum, who are your targeted donors, a community charitable organization /program, is the Scholarship Fund a one-time award or an annual award, what is the amount of the award, does the Fund reach your philanthropic goals?
Naming the Fund
You can name the Fund in memory of your child, the name of a favorite cause, or choose a name that allows you to remain anonymous.
Type of Scholarship Foundation.
In the case of the Kelly Elizabeth Baker Memorial Scholarship Award, we elected to organize the Fund within an existing Community Foundation, the Northern Virginia Community Foundation (NVCF). NVCF gave us the flexibility of directing grants (funds) and other forms of assistance to support the arts, youth, education, health and community improvements including a Scholarship Fund to benefit a senior student at Notre Dame Academy and a Scholarship Fund to benefit a senior student through the Knights of Columbus.
In contrast, the start-up costs for the formation of a separate stand alone Private Foundation would have been excessive with substantial legal, accounting and operational costs, where the Community Fund formation costs were $250. The Community Fund is a 501c(3) tax-exempt organization which allows your donors to receive a charitable tax deduction. A Private Foundation must apply for tax-exempt status through the IRS, a substantial undertaking. Maintenance fees for the Community Foundation are one percent of the fund balance per year, whereas a Private Fund will have numerous expenses for administration, taxes, salaries, accounting, investment and legal advice.
The minimum required size of the Fund, depending on what type of Community Fund is selected can be as little as $500 for an Advised Fund to a minimum of $10,000 for a Designated Fund (see NVCF website for definitions) while the Private Foundation has no minimum, but the fund needs to be substantial to maintain startup and annual costs. For a Community Foundation, cash gifts/contributions are tax deductible up to 50% of Adjusted Gross Income(AGI) and stock donations are deductible at their fair market value as of the date it is received by the Community Foundation. Cash gifts for a Private Foundation are only tax deductible up to 30% of AGI. Public disclosure is not required with a Community Foundation whereas a Private Foundation is required to file annual tax returns and filings that include information on where the grants were given and are fully open to public inspection. No annual taxes and/or filings are required for a Community Foundation. A Private Foundation is generally exempt from income tax, but subject to excise tax on net investment gains. These are the major advantages of a Community Foundation versus a Private Foundation and why we elected the Community Foundation.
There are strict requirements by the IRS through the Pension Protection Act of 2006 (HR 4) resulting in the operation of Scholarship Funds. There are three main issues. First, it is critical to identify the composition of the selection committee members and their roles. The Fund owner is required to take a minority position on the Selection Committee, in other words, cannot be the Chair person. Secondly, the law requires that Scholarships are awarded in an objective and nondiscriminatory manner. To be objective, the Selection Committee must have a minimum of five student applicants for each scholarship awarded. And, thirdly, all Selection Committee members are required to complete a conflict of interest statement.
The less intrusive donors are immediate and extended family. This group understands the intent of the Scholarship easier than others. In addition to family members, donors such as friends, co-workers, local, regional and national corporations and philanthropy organizations; all donations are treated as a charitable tax deduction as long as the Foundation is a 501(c)3 organization.
Educational Scholarship Eligibility Criteria
A select list of criteria needs to be developed but keep in mind if the criteria becomes very specific and hard to understand, most students will not apply due to the difficulty in responding to your criteria. A good balance of general to specific criteria is key.
The information the student provides is strictly confidential. They should be made aware the authority for the collection of this information is stated in Public Law 93-642. The primary purpose for which the information is requested will be used in the selection of an award winner for a specific Educational Scholarship Award. Submitting the information requested is voluntary. Failure to complete the form and essay will prevent the applicant from being considered for the award. Information may be used to publicize the applicant’s selection for this award.
The following are some sample criteria to strike a balance for selection:
Describe your involvement in civic (and religious) activities. Indicate the activity, the date of participation and your role.
Describe your participation and role in extracurricular school activities (sports, clubs, etc).
Describe your academic achievements, emotional, spiritual and artistic (art & music) development in your high school junior and senior years.
Describe any life experiences, if any, which you believe have impacted your grades. Note selection is not based on grade point average.
Describe your intended area of study, your career path and how you feel it will contribute to society.
Recommendation (To be completed by the applicant’s parent, guardian, or other individual selected by the applicant)
Describe the applicant’s inspirational contribution and extra-curricular activities.
Describe why you feel the applicant should receive this award.
Scholarship Fund Longevity
The Scholarship can be a one-time award, an annual event, and/or a perpetual award. The Kelly Elizabeth Baker Memorial Scholarship Award was established to be a perpetual award. In other words, to continue beyond one's life. This can be accomplished by identifying a trustee in your will to administer the specifics of the Scholarship Award.
Keeping up the Momentum
It is extremely important to keep the momentum of the Scholarship in a continuous state of progression to achieve your annual goals and those of your donors and future award recipients. Once the Scholarship award is made, have a notice published in the School newsletter, a Church bulletin, the local and regional newspapers and most importantly write thank you letters to all of your donors. In addition, we write a personalized letter and have a specialized plaque made and presented to the award recipient at the award ceremony.
Each year is an opportunity to expand your donor network. Advise your donors and prospective donors of not only the Scholarship Award but also of other charitable contributions made in your child's memory. For example, we give to the Paul Stephan Home, Martha's Table, The Leukemia & Lymphoma + Multiple Myeloma Society, Compassionate Friends, to name a few, all of which we feel our daughter would approve.