Draft Private Foundation Bylaws

---
name: draft-private-foundation-bylaws
task_id: trusts-estates-private-client/draft-private-foundation-bylaws
description: Closes the gap where agents transcribe founder governance directives verbatim without identifying provisions that conflict with private foundation requirements and federal tax law — including mandatory distribution obligations, dissolution provisions, and conflict-of-interest standards.
activates_for: [planner, solver, checker]
---

# Skill: Draft Private Family Foundation Bylaws

## 1. Subject-matter triage

- Treat the bylaws as the primary deliverable and the advisory memorandum as secondary.
- Read the organizing documents, governance directives, and any IRS or tax-status materials together before drafting.
- Separate provisions that can be adopted as written from provisions that require conforming edits to preserve exempt status and operational compliance.
- If the source set contains multiple founder directives, article constraints, or tax conditions, enumerate them before drafting so each is tested against the governing rules.
- Confirm the bylaws conform to the charter document; bylaws may supplement, but not contradict, the controlling formation document.

## 2. Failure modes the skill is correcting

- Copying founder governance directives verbatim without identifying which provisions must be narrowed, conditioned, or replaced to comply with federal private foundation rules.
- Omitting the carve-out that prevents veto, quorum, or amendment mechanics from blocking legally required distributions or other mandatory compliance actions.
- Drafting a dissolution ban instead of a compliant charitable-dedication provision.
- Treating mission investments, program-related investments, and ordinary portfolio investments as interchangeable.
- Missing conflict-of-interest procedures when insiders also provide services, vote on compensation, or influence transactions.
- Failing to reconcile bylaws against the articles or other formation materials, creating internal inconsistency.
- Leaving the advisory memorandum as a summary rather than a decision-focused list of deviations, authority, and recommended fixes.

## 3. Legal frameworks / domain conventions that apply

- Private foundation distribution rules under Internal Revenue Code section 4942 and related Treasury regulations: bylaws must not obstruct required annual distributions.
- Self-dealing restrictions under Internal Revenue Code section 4941 and related authorities: identify disqualified persons, require disclosure, recusal, and documented approval controls.
- Jeopardizing-investment rules under Internal Revenue Code section 4944: distinguish program-related investments from ordinary investment activity and align governance language accordingly.
- Taxable-expenditure restrictions under Internal Revenue Code section 4945: prohibit lobbying, political activity, and other non-qualifying uses of foundation resources.
- Dissolution compliance under applicable nonprofit and tax rules: assets must be dedicated to qualifying charitable purposes or governmental entities on winding up.
- Amendment governance: use a supermajority standard and preserve the ability to make compliance-driven amendments.
- Board and officer governance: specify qualification, election, removal, vacancies, terms, quorum, meetings, and action without meeting in a way that does not create compliance deadlock.
- Compensation oversight: use a reasonableness review process and documented approval for director, officer, and service-provider compensation.
- Conflict-of-interest standards: require disclosure, abstention, documentation, and a process for related-party approvals.

## 4. Analytical scaffolds

1. Build a directive-by-directive inventory of all founder instructions touching governance, control, amendments, dissolution, investments, grants, or compensation.
2. For each directive, classify it as:
   - adoptable as written,
   - adoptable only with conforming modification,
   - or incompatible and requiring substitution.
3. For every modified or substituted directive, draft compliant language in the bylaws and mirror the deviation in the advisory memorandum with the governing authority.
4. Test the board mechanics as a system: voting power, veto rights, quorum, meeting cadence, written consent, and amendment rules must not combine to deadlock required action.
5. Draft the conflict policy as an operating rule, not a recital: define covered persons, required disclosures, recusal, vote prohibition, documentation, and approval mechanics.
6. Draft grantmaking language that ties recipient diligence, expenditure responsibility, and permissible purpose to the applicable tax rules, including any geographic or program limits imposed by the source materials.
7. Draft the dissolution and amendment provisions last so they reflect the final governance architecture and remain consistent with the articles and tax constraints.
8. Prepare the advisory memorandum issue by issue, pairing each deviation with the legal basis and the recommended compliant substitute.
9. Ensure the bylaws read as a standalone governance instrument, with operative provisions rather than commentary.

## 5. Vertical / structural / temporal relationships

- Formation documents control over bylaws; inconsistency must be resolved in favor of the higher-order document or corrected through conforming drafting.
- Founder directives are subordinate to federal tax requirements; when they conflict, the governing rule controls and the deviation should be identified in both the bylaws footnotes and the memo.
- Board control provisions interact with distribution obligations; no veto, quorum, or amendment rule should be drafted so tightly that legally required action becomes impossible.
- Compensation, related-party service relationships, and conflict rules often overlap; analyze them together before assigning approval authority.
- Investment policy language should distinguish ordinary endowment management from charitable-purpose investing and from prohibited jeopardizing conduct.
- If the source materials limit activity by geography, purpose, or grantee type, include a safety valve so compliance obligations remain achievable if the restricted universe is insufficient.

## 6. Output structure conventions

- Produce two deliverables: the bylaws document and the advisory memorandum.
- Draft the bylaws in an industry-standard sequence: name and principal office; purpose; board of directors; officers; committees if used; conflicts of interest; indemnification; fiscal year; financial and investment matters; grantmaking standards; lobbying and political activity limits; no-members provision; dissolution; amendment.
- Include concise attorney footnotes in the bylaws where a founder directive is modified or narrowed, explaining the legal reason for the deviation.
- Use operative, formal bylaw language; do not write the bylaws as notes, a checklist, or a narrative summary.
- In the advisory memorandum, identify each deviation, the controlling authority, the risk if unmodified, and the recommended conforming language.
- End the memorandum with a clear Recommended Actions section that assigns each step to a role and ties it to a practical timing milestone.
- Preserve a clean distinction between directives that are accepted, those that are revised, and those that are replaced.
- Before finalizing, confirm the bylaws file contains operative clauses and the memorandum contains substantive guidance, not placeholders or descriptions of intended drafting.