January 22, 2004 | Read Time: 2 minutes
Q. I have three small children, and realize that in about 15 years, my first child will be in college. With tuition costs rising, I’d like to plan now for their education. I’d also like contribute toward the education of my friends’ and relatives’ children. My idea is to start a nonprofit organization and hold fund-raising events that will help support this program. Can you direct me toward any resources that would help me create this organization, as well as suggest some boundaries for who should benefit from the program?
A. It’s illegal to start a nonprofit organization solely for the purpose of paying for the education of specific children, says Peter Rohr, private wealth adviser at Merrill Lynch, in Philadelphia. Although you could create a scholarship fund, and seek donations for it, he says, the award process would have to be open to all applicants — and that means that there could be no guarantee that your youngsters would win. You could limit the grants to a particular group of people, such as the people in your hometown, or students who plan to major in a certain field of study. But you can’t limit the scholarship grants to “any predetermined individual applicants, like your children, relatives, or friend’s children,” he says. Your best source for more information on this may be the Council on Foundations. Search the site using the keyword “scholarship,” and you’ll find a lot of helpful information.
If you’re interested in saving specifically for your own children’s future, Mr. Rohr recommends that you consider a Section 529 plan, in which the Internal Revenue Service code allows you to save money in a tax-deferred account to pay for higher education expenses. Go here to learn more about 529 plans.
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