Page 306 - Washington Nonprofit Handbook 2018 Edition

CHAPTER 81. Endowment Funds

Endowment funds require special consideration when ceasing operations.

These funds are restricted as to their use by the nonprofit. Typically, endowment
funds are designated so that the recipient nonprofit may use the income from the
fund while preserving the principal. Special steps must be followed to release
endowment fund restrictions before the funds can be distributed.

Washington has adopted the Uniform Prudent Management of Institutional
Funds Act (“UPMIFA”), RCW 24.55. UPMIFA governs the management and
investment of institutional funds, including endowment funds, by an institution. An
institution governed by UPMIFA includes any entity or organization, other than an
individual, that operates exclusively for a charitable purpose. See RCW 24.55.010(4).
A charitable purpose is broadly defined to include 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. See RCW 24.55.010(1). An institutional fund means a
fund held by an institution exclusively for charitable purposes, subject to certain
exceptions. See RCW 24.55.010(5). An endowment fund is all, or part, of an
institutional fund that is not wholly expendable on a current basis under
restrictions set out in a gift instrument. See RCW 24.55.010(2).

In order to release restrictions imposed on endowment funds:

• The nonprofit may ask the donor to consent (on record) to the release
or modification of a restriction.

• A nonprofit may petition a court with jurisdiction (generally the
superior court) to release or modify a restriction. The Attorney
General must be notified and given the opportunity to be heard on the
matter.

• If (a) the fund has a total value of less than $95,000 (increasing by
$2,500 on July 1 of each year after 2018), (b) it has been more than 20
years since the fund was established, and (c) the nonprofit uses the
property in a manner consistent with the charitable purposes provided
for in the gift instrument, the nonprofit may release or modify a
restriction if the nonprofit determines that a restriction on the
management, investment, or purpose of a fund is unlawful,
impracticable, impossible to achieve, or wasteful. The nonprofit must

WASHINGTON NONPROFIT HANDBOOK -295- 2018