Was it Wise to Try to Implement Trust Law Reforms Through the Uniform Prudent Management of Institutional Funds Act?

Abstract

This Article focuses on two topics that are tangential to UPMIFA’s primary focus on the management and investment of endowment funds and have received little attention: (1) how UPMIFA should apply to institutional funds established between affiliated institutions in light of UPMIFA’s new definitions and expanded scope, and more importantly (2) how the Commissioners’ preoccupation with reforming trust laws creates significant, unnecessary, and avoidable problems under UPMIFA.

Recognizing that there are differences between charitable trusts and charitable institutions, the Commissioners sometimes had to choose when trust law principles should apply and when they should not. In UMIFA, for example, the Commissioners adopted an “ordinary business care and prudence” standard of conduct, concluding that “[t]he proper standard of responsibility is more analogous to that of a director of a business corporation than that of a professional private trustee,” and recognizing that the governing board owes duties to the institution to consider both its long and short-term needs and “weigh the needs of today against those of the future.” These differences cause both UPMIFA and UPMIFA to be a blend of sometimes conflicting legal frameworks.