State Codes and Statutes

State Codes and Statutes

Statutes > California > Prob > 18501-18510

PROBATE CODE
SECTION 18501-18510



18501.  This part may be cited as the Uniform Prudent Management of
Institutional Funds Act.



18502.  As used in this part, the following terms shall have the
following meanings:
   (a) "Charitable purpose" means the relief of poverty, the
advancement of education or religion, the promotion of health, the
promotion of a governmental purpose, or any other purpose the
achievement of which is beneficial to the community.
   (b) "Endowment fund" means an institutional fund or part thereof
that, under the terms of a gift instrument, is not wholly expendable
by the institution on a current basis. The term does not include
assets that an institution designates as an endowment fund for its
own use.
   (c) "Gift instrument" means a record or records, including an
institutional solicitation, under which property is granted to,
transferred to, or held by an institution as an institutional fund.
   (d) "Institution" means any of the following:
   (1) A person, other than an individual, organized and operated
exclusively for charitable purposes.
   (2) A government or governmental subdivision, agency, or
instrumentality, to the extent that it holds funds exclusively for a
charitable purpose.
   (3) A trust that had both charitable and noncharitable interests,
after all noncharitable interests have terminated.
   (e) "Institutional fund" means a fund held by an institution
exclusively for charitable purposes. The term does not include any of
the following:
   (1) Program-related assets.
   (2) A fund held for an institution by a trustee that is not an
institution.
   (3) A fund in which a beneficiary that is not an institution has
an interest, other than an interest that could arise upon violation
or failure of the purposes of the fund.
   (f) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, public corporation, government or governmental
subdivision, agency, or instrumentality, or any other legal or
commercial entity.
   (g) "Program-related asset" means an asset held by an institution
primarily to accomplish a charitable purpose of the institution and
not primarily for investment.
   (h) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.



18503.  (a) Subject to the intent of a donor expressed in a gift
instrument, an institution, in managing and investing an
institutional fund, shall consider the charitable purposes of the
institution and the purposes of the institutional fund.
   (b) In addition to complying with the duty of loyalty imposed by
law other than this part, each person responsible for managing and
investing an institutional fund shall manage and invest the fund in
good faith and with the care an ordinarily prudent person in a like
position would exercise under similar circumstances.
   (c) In managing and investing an institutional fund, an
institution is subject to both of the following:
   (1) It may incur only costs that are appropriate and reasonable in
relation to the assets, the purposes of the institution, and the
skills available to the institution.
   (2) It shall make a reasonable effort to verify facts relevant to
the management and investment of the fund.
   (d) An institution may pool two or more institutional funds for
purposes of management and investment.
   (e) Except as otherwise provided by a gift instrument, the
following rules apply:
   (1) In managing and investing an institutional fund, all of the
following factors, if relevant, must be considered:
   (A) General economic conditions.
   (B) The possible effect of inflation or deflation.
   (C) The expected tax consequences, if any, of investment decisions
or strategies.
   (D) The role that each investment or course of action plays within
the overall investment portfolio of the fund.
   (E) The expected total return from income and the appreciation of
investments.
   (F) Other resources of the institution.
   (G) The needs of the institution and the fund to make
distributions and to preserve capital.
   (H) An asset's special relationship or special value, if any, to
the charitable purposes of the institution.
   (2) Management and investment decisions about an individual asset
must be made not in isolation but rather in the context of the
institutional fund's portfolio of investments as a whole and as a
part of an overall investment strategy having risk and return
objectives reasonably suited to the fund and to the institution.
   (3) Except as otherwise provided by law other than this part, an
institution may invest in any kind of property or type of investment
consistent with this section.
   (4) An institution shall diversify the investments of an
institutional fund unless the institution reasonably determines that,
because of special circumstances, the purposes of the fund are
better served without diversification.
   (5) Within a reasonable time after receiving property, an
institution shall make and carry out decisions concerning the
retention or disposition of the property or to rebalance a portfolio,
in order to bring the institutional fund into compliance with the
purposes, terms, and distribution requirements of the institution as
necessary to meet other circumstances of the institution and the
requirements of this part.
   (6) A person that has special skills or expertise, or is selected
in reliance upon the person's representation that the person has
special skills or expertise, has a duty to use those skills or that
expertise in managing and investing institutional funds.
   (f) Nothing in this section alters the duties and liabilities of a
director of a nonprofit public benefit corporation under Section
5240 of the Corporations Code.



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.



18505.  (a) Subject to any specific limitation set forth in a gift
instrument or in law other than this part, an institution may
delegate to an external agent the management and investment of an
institutional fund to the extent that an institution could prudently
delegate under the circumstances. An institution shall act in good
faith, with the care that an ordinarily prudent person in a like
position would exercise under similar circumstances, in all of the
following:
   (1) Selecting an agent.
   (2) Establishing the scope and terms of the delegation, consistent
with the purposes of the institution and the institutional fund.
   (3) Periodically reviewing the agent's actions in order to monitor
the agent's performance and compliance with the scope and terms of
the delegation.
   (b) In performing a delegated function, an agent owes a duty to
the institution to exercise reasonable care to comply with the scope
and terms of the delegation.
   (c) An institution that complies with subdivision (a) is not
liable for the decisions or actions of an agent to which the function
was delegated except to the extent a trustee would be liable for
those actions or decisions under Sections 16052 and 16401.
   (d) By accepting delegation of a management or investment function
from an institution that is subject to the laws of this state, an
agent submits to the jurisdiction of the courts of this state in all
proceedings arising from or related to the delegation or the
performance of the delegated function.
   (e) An institution may delegate management and investment
functions to its committees, officers, or employees as authorized by
law of this state other than this part.



18506.  (a) If the donor consents in a record, an institution may
release or modify, in whole or in part, a restriction contained in a
gift instrument on the management, investment, or purpose of an
institutional fund. A release or modification may not allow a fund to
be used for a purpose other than a charitable purpose of the
institution.
   (b) The court, upon application of an institution, may modify a
restriction contained in a gift instrument regarding the management
or investment of an institutional fund if the restriction has become
impracticable or wasteful, if it impairs the management or investment
of the fund, or if, because of circumstances not anticipated by the
donor, a modification of a restriction will further the purposes of
the fund. The institution shall notify the Attorney General of the
application, and the Attorney General must be given an opportunity to
be heard. To the extent practicable, any modification must be made
in accordance with the donor's probable intention.
   (c) If a particular charitable purpose or a restriction contained
in a gift instrument on the use of an institutional fund becomes
unlawful, impracticable, impossible to achieve, or wasteful, the
court, upon application of an institution, may modify the purpose of
the fund or the restriction on the use of the fund in a manner
consistent with the charitable purposes expressed in the gift
instrument. The institution shall notify the Attorney General of the
application, and the Attorney General must be given an opportunity to
be heard.
   (d) If an institution determines that a restriction contained in a
gift instrument on the management, investment, or purpose of an
institutional fund is unlawful, impracticable, impossible to achieve,
or wasteful, the institution, 60 days after notification to the
Attorney General and to the donor at the donor's last known address
in the records of the institution, may release or modify the
restriction, in whole or part, if all of the following apply:
   (1) The institutional fund subject to the restriction has a total
value of less than one hundred thousand dollars ($100,000).
   (2) More than 20 years have elapsed since the fund was
established.
   (3) The institution uses the property in a manner consistent with
the charitable purposes expressed in the gift instrument. An
institution that releases or modifies a restriction under this
subdivision may, if appropriate circumstances arise thereafter, use
the property in accordance with the restriction notwithstanding its
release or modification, and that use is deemed to satisfy the
consistency requirement of this paragraph.




18507.  Compliance with this part is determined in light of the
facts and circumstances existing at the time a decision is made or
action is taken, and not by hindsight.



18508.  This part applies to institutional funds existing on or
established after January 1, 2009. As applied to institutional funds
existing on January 1, 2009, this part governs only decisions made or
actions taken on or after that date.



18509.  This part modifies, limits, and supersedes the Electronic
Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001
et seq.), but does not modify, limit, or supersede Section 101 of
that act (15 U.S.C. Sec. 7001(a)), or authorize electronic delivery
of any of the notices described in Section 103 of that act (15 U.S.C.
Sec. 7003(b)).



18510.  In applying and construing this uniform act, consideration
must be given to the need to promote uniformity of the law with
respect to its subject matter among states that enact it.