(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, the following factors:

1. (1) the duration and preservation of the endowment fund;
2. (2) the purposes of the institution and the endowment fund;
3. (3) general economic conditions;
4. (4) the possible effect of inflation or deflation;
5. (5) the expected total return from income and the appreciation of investments;
6. (6) other resources of the institution;
7. (7) where appropriate and circumstances would otherwise warrant, alternatives to expenditure of the endowment fund, giving due consideration to the effect that such alternatives may have on the institution; and
8. (8) the investment policy of the institution. For each determination to appropriate for expenditure, the institution shall keep a contemporaneous record describing the consideration that was given by the governing board to each of the factors enumerated in this paragraph.

(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:

1. (1) create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund; and
2. (2) do not otherwise limit the authority to appropriate for expenditure or accumulate under paragraph (a) of this section.

(d) A rebuttable presumption of imprudence shall apply to gift instruments executed upon or after the effective date of this article as follows: The appropriation for expenditure in any year of an amount greater than seven 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 five 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 five years, the fair market value of the endowment fund must be calculated for the period the endowment fund has been in existence. This subsection does not:

1. (1) apply to an appropriation for expenditure permitted under law other than the chapter of the laws of 2010 that enacted this article or by the gift instrument; or
2. (2) create a presumption of prudence for an appropriation for expenditure of an amount less than or equal to seven percent of the fair market value of the endowment fund. (e)(1) With respect to a gift instrument executed by the donor before the effective date of this article an institution must provide ninety days notice to the donor, if the donor is then available, before applying paragraph (a) of this section for the first time, during which time the donor may clarify or amend the gift instrument to prohibit the application of paragraph (a) of this section. Such notice shall include a form for use by the donor, which shall contain language substantially as follows: Attention, Donor: Please check Box #1 or #2 below and return to the address shown above. ( ) #1 The institution may spend as much of my gift as may be prudent. ( ) #2 The institution may not spend below the original dollar value of my gift. If you check Box #1 above, the institution may spend as much of your endowment gift (including all or part of the original value of your gift) as may be prudent under the criteria set forth in Article 5-A of the Not-for-Profit Corporation Law (The Prudent Management of Institutional Funds Act). If you check Box #2 above, the institution may not spend below the original dollar value of your endowment gift but may spend the income and the appreciation over the original dollar value if it is prudent to do so. The criteria for the expenditure of endowment funds set forth in Article 5-A of the Not-for-Profit Corporation Law (The Prudent Management of Institutional Funds Act) will not apply to your gift. If the donor does not respond within ninety days from the date notice was given, paragraphs (a), (b), and (c) of this section shall be applied.
3. (2) This paragraph shall not apply if: (A) the gift instrument permits appropriation for expenditure from the endowment fund without regard for the fund's historic dollar value; (B) the gift instrument limits the institution's authority to appropriate for expenditure in accordance with paragraph (b) of this section; or (C) the gift consists of funds received as a result of an institutional solicitation without a separate statement by the donor expressing a restriction on the use of funds.
4. (f) When an institution acts pursuant to paragraph (a) or (e) of this section, it shall keep a record of such action.