The Uniform Management of Institutional Funds Act (UPMIFA), a state law adopted in 49 of 50 states, applies to donor-restricted or “true” endowments and provides direction to endowment committees regarding the investment and spending of restricted endowment funds. As a practical matter, it makes sense to manage both your restricted and unrestricted funds under the UPMIFA standards. You need to track the funds separately, however, using sub-accounting in order to know which portion of the endowment is restricted and which is unrestricted.
UPMIFA requires the use of a prudent spending rule that protects the spending power of the restricted portion. The unrestricted portion can be spent down by the Vestry outside of the rules of UPMIFA, but subject to whatever rules you adopt in your enabling resolution. We suggest setting a high standard for spending down the corpus of the unrestricted funds requiring a two-thirds vote of the vestry and a two-thirds vote of the congregation in attendance at the annual meeting or a specially called meeting.