Georgia and Kentucky Allow Donor Standing for Endowment Violations, While Similar Efforts Are Pending in Ohio and Vermont

At a Glance

• The purpose of Georgia's and Kentucky’s new donor intent protection acts is to allow donor standing for violations of donor-imposed restrictions for endowment funds that are governed by an endowment agreement.
• Georgia and Kentucky are now the third and fourth states to allow donor standing for endowment violations, following Iowa and Kansas.
• The Ohio and Vermont legislatures are considering similar efforts.

Georgia and Kentucky Allow Donor Standing for Endowment Violations

On April 9, 2024, Kentucky’s governor signed Senate Bill 70, which will take effect on July 15, 2024, and will amend Kentucky’s version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). On April 22, 2024, Georgia’s governor signed Senate Bill 433, which will take effect on July 1, 2024, and will be codified at O.C.G.A. §§ 14-3-190 – 14-3-192. 

The purpose of these new laws is to allow donor standing for violations of donor-imposed restrictions for endowment funds that are governed by an endowment agreement. Endowment funds and modification of donor-imposed restrictions are also subject to Georgia and Kentucky’s versions of UPMIFA (located at O.C.G.A. §§ 44-15-1 – 44-15-8 and KRS §§ 273.600 – 273.645, respectively).

Pursuant to these two new laws, a donor or their legal representative can file a complaint against a charitable organization based in Georgia or Kentucky within four years after discovery of that organization’s violation of the endowment agreement. Although Georgia leaves the term “legal representative” undefined, Kentucky defines “legal representative” as any of the following:

• The administrator or executor of the donor’s estate
• A surviving spouse if there is a judicial settlement of the accounts of an individual’s estate
• Any living, named individual designated in an endowment agreement to act in place of the donor with respect to the matters expressed in the agreement.

Georgia’s version of the law also provides standing to a donor’s lineal descendants (children, grandchildren and/or great-grandchildren).

While these laws grant donor standing, they do not allow donors to seek an award of damages or a return of the donor’s contributions to the donor, the donor’s lineal descendants, the donor’s legal representative or the donor’s estate. Instead, the laws limit donors (and their legal representatives and/or lineal descendants) to remedies that are consistent with the charitable purposes expressed in the endowment agreement.

These new laws also expressly allow a charitable organization to obtain a judicial declaration of the rights and terms contained within an endowment agreement, including any donor-imposed restrictions and/or actions contemplated by the agreement. However, there is no specific requirement that the organization provide notice to the donor (or their legal representative or lineal descendants) in such a case.

Georgia and Kentucky are now the third and fourth states to allow donor standing for endowment violations, following Iowa (which allowed for donor standing when it first adopted UPMIFA in 2008) and Kansas (which adopted its own version of the Donor Intent Protection Act in 2023).¹ See Iowa Code § 540A.106(5); K.S.A. §§ 58-3621 – 58-3625; see also our prior discussion of the Kansas Donor Intent Protection Act.

Similar Efforts Are Pending in Ohio and Vermont

In Ohio, Senate Bill 83 would provide donor standing for violations of a donor’s endowment agreement by a state higher education institution (as opposed to violations by nonprofits more broadly). See our prior discussion of Ohio Senate Bill 83. Although SB 83 passed the Senate in May 2023, it has languished in the House since then (being reported out of the House Higher Education Committee in December 2023, before being referred to the House Rules and Reference Committee in January 2024). A similar bill (House Bill 151) has languished in the House since April 2023. Both bills technically remain pending and there is a possibility that either could advance prior to the end of Ohio’s legislative session in December 2024.

In Vermont, House Bill 583 would amend Vermont’s version of UPMIFA (located at 14 V.S.A. §§ 3411- 3420) to create Vermont’s version of the Donor Intent Protection Act. Although the bill has not made it out of the House Judiciary Committee since it was introduced in January 2024, there is a possibility that it could advance prior to the end of Vermont’s legislative session in May 2024.

Future Developments

Our team will continue to monitor developments of the law in this area.