The judging panel will be chaired by bestselling author Maggie O'Farrell.
She said: "Encouragement from a writer of Hilary Mantel's stature is nothing short of transformative. It's like winning a thousand lotteries for debut writers."
The two authors shared an agent and it was decided offering an award for unpublished writing was the best way to honour her memory.
O'Farrell said she had two letters from Dame Hilary when they were shortlisted for the same prize.
She said she kept the prized the correspondence folded inside her books, adding: "Any letter from her was like everything she ever wrote - sparkling and incisive and just a joy to read."

