New Jersey recently adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA), replacing the 1975 Uniform Management of Institutional Funds Act (UMIFA). Both UPMIFA and UMIFA provide rules for how certain wholly charitable institutions, including hospitals, universities and their foundations, should make investment decisions for both their endowment and non-endowment assets. In addition, at the time it was enacted, UMIFA created new standards that increased the ability of an institution to spend from an endowment. The act, however, also placed limitations on charitable institutions that made it difficult to make distributions from endowment assets during a period that an endowment is worth less than the value of the assets that have been contributed to it. UPMIFA adopts an approach that allows a charitable institution’s board to spend money from an endowment fund as long as the decision to spend is financially prudent and consistent with donor intent.
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