Grady-White Boats Owner Gifts Company to Charity Over $400M Sale
Earlier this month, Eddie Smith Jr., the 83-year-old owner of Grady-White Boats, made what was likely one of the biggest decisions of his life. In lieu of accepting offers exceeding $400 million to sell his company, Eddie chose to gift the entire enterprise to a perpetual purpose trust, pledging that 95% of future profits, potentially tens of millions of dollars annually, would flow to charitable causes focused on conservation, health care and education. This extraordinary act of generosity places Eddie among a small but growing group of business owners who are reimagining corporate succession through purpose-driven structures.
As the The New York Times reports, in 1968, Eddie took a risk on a small boat maker based in Greenville, N.C. that was headed under water. He successfully turned around the business, turning Grady-White Boats into the high-end recreational fishing boat company it is today.
Following Patagonia’s Pioneering Path
Eddie’s decision to donate future profits to charity closely mirrors the groundbreaking move made by Yvon Chouinard, founder of outdoor apparel giant Patagonia, in September 2022. Yvon transferred his $3 billion company’s voting stock (representing 2% of the company’s value) to the Patagonia Purpose Trust and the non-voting stock (98% of the value) to the Holdfast Collective, an Internal Revenue Code Section 501(c)(4) social welfare organization. This structure ensures that approximately $100 million in annual profits fund environmental protection efforts while maintaining the company’s core values and mission.
The Patagonia model has inspired what some call the “steward ownership” movement. By separating voting control from profit rights, these structures ensure that business values remain paramount while channeling financial success toward social good. It’s a unique model that allows a company to retain its owner’s vision and its culture, rather than acquiescing to investors or being acquired. Since 2018, the number of U.S. companies adopting purpose trusts has grown from just seven to 81, with Grady-White becoming the first marine industry company to embrace this approach and reportedly the largest such transaction since Patagonia.
“In my experience, doing something like this is exceptionally rare. Typically, wealthy individuals will fund a portion of their wealth to a private foundation, a donor-advised fund, or to charity,” said Roger A. Grad, partner in Buchalter’s Nashville office and a member of the Tax, Benefits and Estate Planning practice group. “Currently, I am working on an estate plan that will result in 30% of the assets going to charity. Honestly, I think that’s at the top of the list for me,” he mused.
Purpose Trust Succession Planning
Purpose trusts represent a unique estate planning tool designed to fulfill a specific mission rather than benefit individual heirs. Unlike traditional trusts that distribute assets to named beneficiaries, purpose trusts exist to perpetuate a stated objective, whether maintaining a business’s values, supporting charitable causes or preserving a company’s culture and employee relationships.
The purpose trust model also offers several advantages for business succession. It keeps companies private, prevents mission drift that often accompanies traditional sales, provides job security for employees and ensures that founding values guide future management decisions. For owners without heirs (or without heirs interested in running the business) or those concerned about maintaining company culture, purpose trusts can be a perfect solution.
Eddie’s only child, Chris, died five years ago from Lou Gehrig’s disease, and his wife died the year before. Eddie was forced to reevaluate his succession plan after these losses, leading him to adopt a purpose trust structure.
The Grady-White Boats Perpetual Purpose Trust will oversee company management, ensuring continuity in operations, maintaining the company’s commitment to quality and preserving profit-sharing arrangements with employees. The structure also ensures that the business will never be sold. Meanwhile, the accompanying IRC Section 501(c)(4) non-profit organization will receive the vast majority of profits for charitable distribution. Eddie, meanwhile, will take a salary.
Estate Planning and Tax Considerations
The tax implications of purpose trust structures are complex and depend heavily on specific design elements. From an estate-planning perspective, purpose trusts offer powerful benefits. They remove business assets from the owner’s taxable estate, potentially saving millions in estate taxes.
When Yvon transferred Patagonia’s ownership, his family faced an estimated $17.5 million gift tax bill because the business interests weren’t donated directly to a charity. However, the way the transaction was structured saved Yvon an estimated $700 million in federal capital gains taxes he would have owed had he sold the company. Plus, it also helped Yvon save on future estate taxes.
While allowing owners to maintain their company’s mission and values in perpetuity and create a lasting legacy that extends far beyond financial wealth transfer, these structures require careful planning, as purpose trusts are typically irrevocable. Independent boards must govern both the trust and associated non-profit organizations to ensure proper administration and avoid conflicts of interest. Eddie, for instance, will transition to a non-operational CEO emeritus role, serving as an advisor and brand ambassador without controlling the company’s future direction.
A New Model for Corporate Responsibility
Eddie’s decision to forgo a $400 million payday represents more than personal generosity. It signals a potential shift in how successful business owners think about succession and legacy. By following Patagonia’s example and creating a purpose trust structure, Eddie ensures that Grady-White Boats will continue operating according to his principles while generating substantial charitable impact for decades to come.
As more business owners explore alternatives to traditional sales or family transfers, purpose trusts may become increasingly common. They offer a compelling answer to the question of how to preserve a company’s soul while maximizing its positive impact on society, proving that sometimes the greatest profit comes not from what we take, but from what we give away.
