Section 18504 Of Part 7. Uniform Prudent Management Of Institutional Funds Act From California Probate Code >> Division 9. >> Part 7.
18504
. (a) Subject to the intent of a donor expressed in the gift
instrument, an institution may appropriate for expenditure or
accumulate so much of an endowment fund as the institution determines
is prudent for the uses, benefits, purposes, and duration for which
the endowment fund is established. Unless stated otherwise in the
gift instrument, the assets in an endowment fund are donor-restricted
assets until appropriated for expenditure by the institution. In
making a determination to appropriate or accumulate, the institution
shall act in good faith, with the care that an ordinarily prudent
person in a like position would exercise under similar circumstances,
and shall consider, if relevant, all of the following factors:
(1) The duration and preservation of the endowment fund.
(2) The purposes of the institution and the endowment fund.
(3) General economic conditions.
(4) The possible effect of inflation or deflation.
(5) The expected total return from income and the appreciation of
investments.
(6) Other resources of the institution.
(7) The investment policy of the institution.
(b) To limit the authority to appropriate for expenditure or
accumulate under subdivision (a), a gift instrument must specifically
state the limitation.
(c) Terms in a gift instrument designating a gift as an endowment,
or a direction or authorization in the gift instrument to use only
"income," "interest," "dividends," or "rents, issues, or profits," or
"to preserve the principal intact," or words of similar import have
both of the following effects:
(1) To create an endowment fund of permanent duration unless other
language in the gift instrument limits the duration or purpose of
the fund.
(2) To not otherwise limit the authority to appropriate for
expenditure or accumulate under subdivision (a).
(d) The appropriation for expenditure in any year of an amount
greater than 7 percent of the fair market value of an endowment fund,
calculated on the basis of market values determined at least
quarterly and averaged over a period of not less than three years
immediately preceding the year in which the appropriation for
expenditure is made, creates a rebuttable presumption of imprudence.
For an endowment fund in existence for fewer than three years, the
fair market value of the endowment fund shall be calculated for the
period the endowment fund has been in existence. This subdivision
does not do any of the following:
(1) Apply to an appropriation for expenditure permitted under law
other than this part or by the gift instrument.
(2) Apply to a private or public postsecondary educational
institution, or to a campus foundation established by and operated
under the auspices of such an educational institution.
(3) Create a presumption of prudence for an appropriation for
expenditure of an amount less than or equal to 7 percent of the fair
market value of the endowment fund.