A recent Wall Street Journal article on “How to Start Your Own College Scholarship” highlights the increasing interest in scholarship activity, and presents different options for those who would like to set up a scholarship fund.

When the journalist reached out to Karen Leaffer Schauble of Schauble Law Group for the legal perspective on this trend, she shared the following option of using a private foundation to conduct scholarship activity, and some of the benefits and burdens that can come with that:

Those with $1 million or more to give away may want to consider establishing a private foundation. As long as the Internal Revenue Service approves the foundation’s gift-giving procedures, the donor can maintain control over who receives the grants, says Karen Leaffer Schauble, a Denver lawyer who specializes in nonprofit law. But in addition to being costly to set up and run, private foundations limit donors’ annual tax deductions to 30% of adjusted gross income for cash contributions and to 20% for gifts of property.

Those willing to work with an existing public charity can get naming rights for donations of as little as $1,000. They also pay lower fees and can deduct more—as much as 50% of adjusted gross income for donations of cash and up to 30% for other assets, says Ms. Leaffer. The hitch: The donor—and his or her relatives and business associates—can have only a minority vote in the selection of the scholarship recipient, says Ms. Leaffer.

The article also illustrates some alternatives to private foundations, including donor-advised funds. If you are interested in learning more about scholarship options and alternatives, or have questions we can address in the nonprofit law blog, contact Karen at kschauble@leafferlaw.com or Becky at bseidel@leafferlaw.com.