Questions from NCFP Members on Board Compensation

Our foundation’s third generation is coming on the board and some have young children. Some family members say the lack of child care during board meetings hinders participation. Can the foundation pay for child care so that parents can attend board meetings?

Generally no.

According to legal expert Andrew Schulz, such payments are acts of self-dealing and illegal unless they are treated as taxable income to the board member. As with staff members, if an employer provides daycare or pays for it directly to a third party, it’s considered taxable income. If such payments are not reported as income on a Form 1099 or W-2, they would constitute self-dealing, and the foundation risks serious penalties.

You can compensate board members as long as their compensation is reasonable and necessary. You can reimburse them for their out-of-pocket expenses for travel and food and other related expenses—like taxi cabs and tips—but not for the personal expenses that enable them to travel—like childcare, kennel services, and house-sitting.

How can we help a group of preteens evaluate which philanthropic organizations they should support?

In her book The Giving Family: Raising Our Children to Help Others, Susan Price, Vice President of the National Center, suggests using these questions:

• How solid is the organization? How long has it existed? Does it have strong leaders?
• How does the organization address community needs?
• Who does the organization serve? How many are served annually?
• Does the organization have wide community support?
• What does the organization plan for the future?

These questions give you a starting point for discussing where the youths’ funds may make the most difference.

We recently sold the family business, and the resulting windfall puts us in a position to make a real difference. But we’re not ready to just put ourselves out there. When should we give privately and when should we give anonymously?

Some of the best advice we’ve received on this issue is to ask whether or not taking some sort of credit serves the gift, the grantee, and your own values. If taking some credit will help the grantee attract more dollars, serve more people, and encourage you to give again (we all love a little acknowledgment now and then), then allow yourself some recognition and publicity. If taking some credit might draw attention away from the grantee’s work, interfere with it, distract your family from your larger program goals, or make you uncomfortable, consider giving anonymously.

May our board pay someone for portfolio management if they are an employee of a company owned or led by a board member and direct descendant of the foundation’s father?

Yes, even if the individual being employed to do that work is a disqualified person, paying someone reasonable and necessary compensation to manage the assets of the foundation, regardless of how that relationship comes about, would be permissible.

So, the fact that the person could be a disqualified person, either by being a descendant, working at the foundation, or being an employee of a disqualified person’s company, all of those things do not matter. The person is disqualified under those facts, but it is an exception to the self- dealing rules to pay them for personal services, including investment management.

There are conflicts of interest that need to be navigated, and you may also want to consider concerns about your public image for someone with this relationship in this way, but it is legal under the tax code.

If you have your own question on this or other family philanthropy topics please get in touch with our team.