Clients looking to establish a financial memorial in the name of a loved one should set a goal and timeline for the fund and then team with an appropriate community foundation or nonprofit to administer the funds, an adviser recommends.
“Find a focus, maybe something your loved one believed in or attended, and then pair up with an organization,” said Aly-son Scott of Morgan Stanley Smith Barney LLC. “Running a fund and being compliant tends to take more time and money than is necessary.”
A scholarship, for example, can be administered through a university or other nonprofit, allowing the person donating or raising the money to avoid the tax and legal compliance issues that come with administering the fund, Ms. Scott said.
The donor typically still can direct how the funds are awarded.
The development officer of the school can tell donors if they have minimum requirements for how much must be donated or for how long the scholarship is expected to exist, Ms. Scott said.
Unless a family or individual has at least $1 million, or more likely $5 million, it doesn't make sense to set up a foundation because of the expense of running it, she said.
Clients who may be interested in setting up a fund that would send money to individuals or groups outside the United States would need special guidance because of the added complexities of donating outside the country.
It is important that donors decide how much they want to be involved with the distribution of the funds before they approach an organization, said Jay Higgins, an adviser at Riverbridge Partners LLC.
“Take the time to choose the organization, and make sure it can carry out the goals you want on behalf of your loved one,” he said.
