Hotel magnate Barron Hilton, 80, will donate 97% of his $2.3bn (£1.2bn; 1.6bn euros) fortune to the Conrad N Hilton Foundation, set up by his father.
The funds come from the $20bn sale of Hilton Hotels to The Blackstone Group.
Reports have said that Mr Hilton is embarrassed by the behaviour of his granddaughter.
Ms Hilton, known for her party lifestyle, spent three weeks in jail earlier this year for violating probation in a drink driving case.
Mr Hilton will give $1.2bn immediately to a charitable trust that will eventually benefit the foundation.
The rest of the money will follow after his death.
The foundation supports projects that provide clean water in Africa, education for blind children and housing for the mentally ill.

Paris Hilton announced that she will soon come to Belgrade to promote her Champaign wine Rich Prosecco.
The controversial heiress announced to Serbian Press that she will spend two days in the Serbian capital, which she will also use to meet people.
Paris has already visited China, also to promote her wine, and she announced that her next stops will be India and Serbia.
The Hiltonette at the moment is in Berlin where, apart from promotional duties, is fooling around dancing on the bar.
Paris is in the German city promoting her new line of champagne-in-a-can.
A classy beverage for a classy lady!
Paris posed next to a lifesize cardboard cutout of herself and then stocked up on cans of the champagne at a supermarket.
As she 'paid' for her goods, the cameras picked out a mirror in her bag that appeared to be stained with an 'unknown' substance.
Next up, she hit up an artificial ski slope where she posed again with a promotional cut-up of herself before losing her dignity further by taking a sleigh ride on a blow-up ring.
Finally it was off to a Christmas market.
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