529 scholarship accounts are a great way to generate business and also create future referral and networking opportunities. Charitable organizations that offer scholarships usually have a dedicated staff member for administrating finances, or may outsource fund management to third-party administrators. The additional costs associated with recordkeeping and program administration may mean that the organization can pay out fewer dollars in the form of scholarships. You can help by suggesting that the organization use a 529 account as the funding vehicle for its scholarship accounts.
Using a 529 plan as the vehicle for a scholarship fund can reduce the organization’s recordkeeping costs, although the 529 plan’s fees and expenses will apply. The organization can make unlimited contributions to the account as long as contributions do not exceed the amount reasonably expected to be awarded via scholarships. No beneficiary needs to be designated at the time that the scholarship account is established, and the organization retains control of the account as long as it exists. Finally, when scholarships are given, transferring funds directly from the 529 account to the school or university ensures the recipient uses the funds for education expenses.
To find charities in your area, you can search the IRS Web site.