Setting Inheritance and Propagation flags with set-acl and powershell

Question

Here's a table to help find the required flags for different permission combinations.

    ╔═════════════╦═════════════╦═══════════════════════════════╦════════════════════════╦══════════════════╦═══════════════════════╦═════════════╦═════════════╗
    ║             ║ folder only ║ folder, sub-folders and files ║ folder and sub-folders ║ folder and files ║ sub-folders and files ║ sub-folders ║    files    ║
    ╠═════════════╬═════════════╬═══════════════════════════════╬════════════════════════╬══════════════════╬═══════════════════════╬═════════════╬═════════════╣
    ║ Propagation ║ none        ║ none                          ║ none                   ║ none             ║ InheritOnly           ║ InheritOnly ║ InheritOnly ║
    ║ Inheritance ║ none        ║ Container|Object              ║ Container              ║ Object           ║ Container|Object      ║ Container   ║ Object      ║
    ╚═════════════╩═════════════╩═══════════════════════════════╩════════════════════════╩══════════════════╩═══════════════════════╩═════════════╩═════════════╝

So, as David said, you'll want

InheritanceFlags.ContainerInherit | InheritanceFlags.ObjectInherit
PropagationFlags.None

I think your answer can be found on this page. From the page:

This Folder, Subfolders and Files:

InheritanceFlags.ContainerInherit | InheritanceFlags.ObjectInherit 
PropagationFlags.None

Here's some succinct Powershell code to apply new permissions to a folder by modifying it's existing ACL (Access Control List).

# Get the ACL for an existing folder
$existingAcl = Get-Acl -Path 'C:\DemoFolder'

# Set the permissions that you want to apply to the folder
$permissions = $env:username, 'Read,Modify', 'ContainerInherit,ObjectInherit', 'None', 'Allow'

# Create a new FileSystemAccessRule object
$rule = New-Object -TypeName System.Security.AccessControl.FileSystemAccessRule -ArgumentList $permissions

# Modify the existing ACL to include the new rule
$existingAcl.SetAccessRule($rule)

# Apply the modified access rule to the folder
$existingAcl | Set-Acl -Path 'C:\DemoFolder'

Each of the values in the $permissions variable list pertain to the parameters of this constructor for the FileSystemAccessRule class.

Courtesy of this page.

Just because you're in PowerShell don't forgot about good ol' exes. Sometimes they can provide the easiest solution e.g.:

icacls.exe $folder /grant 'domain\user:(OI)(CI)(M)'

Here's the MSDN page describing the flags and what is the result of their various combinations.

Flag combinations => Propagation results
=========================================
No Flags => Target folder.
ObjectInherit => Target folder, child object (file), grandchild object (file).
ObjectInherit and NoPropagateInherit => Target folder, child object (file).
ObjectInherit and InheritOnly => Child object (file), grandchild object (file).
ObjectInherit, InheritOnly, and NoPropagateInherit => Child object (file).
ContainerInherit => Target folder, child folder, grandchild folder.
ContainerInherit, and NoPropagateInherit => Target folder, child folder.
ContainerInherit, and InheritOnly => Child folder, grandchild folder.
ContainerInherit, InheritOnly, and NoPropagateInherit => Child folder.
ContainerInherit, and ObjectInherit => Target folder, child folder, child object (file), grandchild folder, grandchild object (file).
ContainerInherit, ObjectInherit, and NoPropagateInherit => Target folder, child folder, child object (file).
ContainerInherit, ObjectInherit, and InheritOnly => Child folder, child object (file), grandchild folder, grandchild object (file).
ContainerInherit, ObjectInherit, NoPropagateInherit, InheritOnly => Child folder, child object (file).

To have it apply the permissions to the directory, as well as all child directories and files recursively, you'll want to use these flags:

InheritanceFlags.ContainerInherit | InheritanceFlags.ObjectInherit 
PropagationFlags.None

So the specific code change you need to make for your example is:

$PropagationFlag = [System.Security.AccessControl.PropagationFlags]::None