Avoiding Conflicts of Interest and Self-Dealing for Family Foundation Boards

Publication date: 
May, 2013

Federal law regarding conflicts of interest and self-dealing at foundations can be complex and confusing. Family foundation boards that are eager to comply with both the letter and spirit of the law should understand the legal definition of “disqualified persons” as well as the variety of rules for certain regulated activities. These rules prohibit the trustees themselves, certain family members, managers, and other “disqualified persons” from benefiting from the philanthropic activities of the foundation.

Although far-reaching and pervasive, the rules do permit certain activities, such as purchasing investment services from a disqualified person for a fair price. The rules discourage most other business and financial dealings between a private foundation and its disqualified persons, no matter how fair or reasonable. When in doubt, prudent trustees should always consult legal counsel.

This resource topics including:

  • The history of self-dealing rules
  • Definitions related to "who is a disqalified person?"
  • General rules and examples related to self-dealing
  • Investments and self-dealing 
  • Definitions for reasonable compensation

 

Resource type: