Your December Checklist for a 2015 Business Sale

/in , /by Don Ross
Thinking of selling in 2015? Here are ten actions you can take this month to achieve a higher price in the New Year. 
  1. Finish 2014 strong.  Buyers and their lenders will want to see your last full fiscal year profits on an uptick. Ship and invoice everything you should this month. Resist artificially pushing income into next year to reduce your tax bill.  Don’t go nuts prepaying expenses like monthly service contracts, retainers or rent.  Review the functional health of fixed assets.  They should be in good working order – after all you’re still in business – but refrain from replacing good with new this December.
  2. Sell off non performing assets. Assets that aren’t being used productively in a business reduce its return on assets. And, it can be hard to convince buyers that such assets aren’t necessary. If they aren’t necessary, dispose of them now and get them off of your balance sheet. Also, you’ll generate extra cash now that you probably wouldn’t get in a sale of the business.
  3. Assess inventory levels.  If your inventory turns are below industry norms, convert excess or slow moving inventory to cash. Write off any dead inventory that may be lingering on the books.  Why? Simply put, buyers buy cash flow, not inventory.  A one-time inventory write off is relatively easy to explain, and you won’t get paid for it in a sale. Also, Now is the time to take a physical inventory count (rather than estimate), and adjust your books accordingly.
  4. Have your CPA review the financials.  For those of you who haven’t prioritized accounting in the past, now’s the time! Are year-end CPA-provided expenses such as depreciation reflected in the income statement?  Are all “suspense” accounts eliminated and properly attributed to the right accounts?  Are divestitures of fixed assets removed from the balance sheet?  Are the financials verifiable against federal tax returns? Are capital leases correctly accounted for? Does the balance sheet make sense? Will your accounting make sense to a buyer’s accountant in due diligence?  Why is this important? As business brokers, over and over we see good buyers and lenders turned off by shoddy accounting.
  5. Pay as much as you can in taxes this year.  No, this is not a typo! Why? “Lifestyle entrepreneurs” who hide profits and pull everything they can out of their business often find it difficult to sell that business for a good price.  Entrepreneurs who pay the tax can usually sell the business at a multiple of earnings that well exceeds the additional taxes they shelled out. Explain to your CPA that you are selling in 2015; they should understand.
  6. Prepare the tax returns early.  Close the books and turn them over to your CPA as soon as possible after year end. Why? Business acquisition lenders need to see tax returns, and we can get an early jump on having your business preapproved for financing if the 2014 tax return is prepared.
  7. “Tend the Herd”.  If your business has customers under contract, find ways to extend those contracts.  If your customer portfolio is limited and you have one or two major clients that comprise a large share of your business, aggressively pursue new clients for better diversification.  The same is true with vendors.  Why? This reduces risk for buyers (and you), and business value is inversely proportional to risk.
  8. Update your business plan.  Why is this important if you’re selling? Buyers prefer to see business-as-usual while a business is for sale — especially buyers who are willing to pay top dollar. Businesses with a clear and compelling growth plan sell for more money.
  9. Assemble your transition team.  Consistent success in business sales requires A) an organized process, and B) expertise that few business owners have.  Assemble a team that includes at minimum a competent business/M&A broker, wealth manager, business transaction attorney and accountant. Pay for their advice and let them collaborate. You receive more in the end when you use the best advisors from the very beginning.
  10. Plan for your future.  Beyond the business sale, there is your next adventure to ponder.  Look forward to it. Find time during December to plan for it – with your transition team, so that you can enjoy it when the time comes.
Successful entrepreneurs plan their exit and sell from a position of strength, on their terms and time frame. For more information on any of the above points, or to sell your Northern California business, contact Don Ross at 707-778-0210.

Your Buy-Sell Agreement – Keep It Current Before It Costs You Money and Grief!

/in , , /by Exit Strategies

Buy-Sell agreements (BSA’s) are an essential, and often overlooked, element in allowing shareholders to realize the value of their investment in a privately held company. The BSA’s purpose is to a) provide a market for ownership interests, b) establish the price and terms for these interests, c) specify a buy-sell process that is orderly and reasonable, and d) specify financing should a “trigger” event occur. There are several reasons this contract among owners can fail. Let’s briefly examine a few reasons why this can occur and it will become obvious why this document needs to “live and breathe” outside the confines of the corporate archives.

A BSA that is written upon entity formation, even if well-articulated, becomes less relevant as time marches on.  This happens for myriad reasons ranging from changes in business conditions and value, or changes in an owners personal situation or objectives. Language in BSA’s is often not sufficiently precise and leaves too much room for interpretation that can result in shareholder disputes and costly litigation that dilutes value for all shareholders.

There are three types of BSA’s: fixed price; formula pricing; and valuation process. Business valuation is a function of economic conditions and business fundamentals. Of the three BSA types, only the valuation process is flexible enough to fully accommodate the range of changes that can occur in a business. Fixed price and formula driven valuations may be less expensive to execute, but they are simplistic and can omit key value determinants that ultimately can prove very costly.

There are a wide range of trigger events where an owner may quit, be fired, retire, die, be disabled, or get divorced to name only a few. Each trigger event can alter the personal objectives of one or more owners, impact the business, and may have both control and valuation implications for all concerned parties.

Template-driven BSA’s frequently either omit, or do not make a clear distinction on the standard of value to be used in calculating value. For example, the difference between using an investment value standard or a fair market value standard can be very large. If the standard is not clear in the BSA, a buyer would naturally assume the lower price implied in the fair market value standard, while a seller would assume the higher price found in the investment value. Hence, if the BSA does not clearly address this issue, conflict and costly litigation is a likely outcome. Similarly, the level of value also has valuation implications that create potential for conflict if not clearly addressed in the BSA, because the difference between a controlling interest and a minority interests can be substantial.

As is now readily apparent, a well-defined and current BSA is important to accurately allocate value and keep the peace! Key elements of the BSA should seem reasonable to all owners BEFORE a trigger event (before the parties know if they will be a buyer or a seller), when it is easier to reach consensus. AFTER a trigger event this becomes difficult since there is an inherent conflict between a buyer and a seller.

Business valuation plays a central role in Buy-Sell Agreements. For more information about Exit Strategies’ BSA-related services contact one of our senior business appraisers.

Don’t be a Victim of Seller’s Remorse

/in , /by Jim Leonhard
More business owners than you’d think second-guess themselves within a year of selling the business.  In my experience as an M&A advisor and business valuation expert, the main reason for the failure of business exits is the seller’s lack of planning on how and when to exit.  Too many owners never plan and simply wait until something happens that essentially forces them to sell, such as health issues, marital stresses, poor business conditions, or when “burnout” becomes unbearable. This is usually the worst time to sell — and the results are usually disappointing.
If you are approaching retirement, start proactively planning for it well ahead of time (3-5 years) while things are going well and while you have time to make and reap the benefits of course corrections.  Have the business professionally valued when you start to plan.  This will give you a sound basis for knowing what your business is worth, and understanding its strengths and weaknesses from strategic and financial investor perspectives.  If the value of the company is equal to or greater than you need or want, you can take steps to keep it that way and protect against contingencies.  If the value is less than you need or want, you have time to construct and implement a plan to increase value and reduce investor risk.
Your plan can then ensure that you exit on your time frame, maximize value regardless of the situation, minimize taxes, and reach your personal goals.
For more information about preparing to sell and exiting your business successfully, please contact Jim Leonhard at 916-800-2716 or jhleonhard@exitstrategiesgroup.com. 

Ingredients of a Successful Business Sale

/in , /by Al Statz
Going to market when you and your business are ready to sell and market conditions are right provides the best opportunity to maximize results. Let’s look at how these three ingredients combine:
  1. You, the Owner
  2. The Business itself
  3. The Market
Having these ingredients come together at the same time requires planning. You can prepare personally and you can prepare your company for sale.  You can’t control the market, but you can choose market timing. So, basically, it’s up to you to prepare yourself and your business so that you can initiate the sale process when market conditions are favorable.

Are you and your business prepared to sell?   

In complex business deals, we achieve more in the end when we use great advisors from the very beginning. Most business transition teams include an experienced M&A broker, valuation expert(s), an accountant with a strong tax background, a business transaction attorney, and a financial planner. Depending on the nature of the business and the type of transaction, other specialists may be needed. An experienced M&A broker can help you form a great ensemble.
Some of the questions that a transition team can help you answer include:
  • What is the company’s probable selling price in today’s market?
  • Are value drivers and detractors clearly identified?
  • How do marketability, goodwill transferability, due diligence survivability, and deal finance-ability measure up?
  • Who are the most likely buyers and what deal terms are you likely to see?
  • Is cash flow being optimized at this time?
  • Does management have good visibility and a clear runway?
  • Are you on top of major industry and market trends?
  • Will net sale proceeds be sufficient to support your (family’s) desired life style?
  • How will your proceeds be reinvested?
  • Are you ready for life after business? What are your personal plans?
  • Are you prepared to assist in a smooth ownership transition?
  • What steps can be taken now to minimize taxes and reduce risk at deal time?
  • Is the management team sufficiently committed to the future success of the company?
  • Are key employee incentives in place to support a sale?
  • Are leases and contracts assignable and attractive to a buyer?
  • Is intellectual property properly titled, protected and transferable?
  • Are all books and records in good order?

Plan ahead, or plan for less

There are so many potential obstacles to a successful sale that planning is a must.  Unless you have substantial training in this area and deal experience, its hard to see the obstacles, let alone overcome them.  A transition team will more than pay for itself as its insights and  recommendations help remove obstacles and add value, sometimes substantially, while you focus on running the business at peak performance and maintaining strong relationships with key stakeholders during the sale process.
 
If you have questions about preparing to for a business sale or forming a transition team, call Al Statz at 707-781-8580 or email Al to arrange a confidential consultation.

Is your company an add-on candidate?

/in , /by Al Statz
Most business acquisitions by private equity firms have been “add-on” deals lately.
In private equity jargon, a large company acquisition is usually a platform acquisition, and a smaller company acquistion is most often an add-on  (or “bolt-on”, or “tuck-in”) acquisition. Add-on acquisitions are complementary to and synergistic with an existing platform company held by a private equity firm. Platform acquisitions dominate the headlines and represent most of the dollar volume, but add-ons now represent the majority of deals.
The trend toward a higher percentage of smaller private equity transactions is continuing this year, as private equity groups have shifted their attention to add-on opportunities. This upward trend in add-ons is occurring across all industries and regions of the U.S. according to Pitchbook, a private equity and venture capital market research firm. Pitchbook focuses on the higher end of the middle market (over $50M transactions), however we’re seeing increased interest in add-ons at the very low end (transactions under $10M) as well.  Click here for a copy of the Pitchbook Q4 2014 U.S. Private Equity Breakdown report.
According to Pitchbook, high valuations are at least partially responsible for the continuing increase in add-ons, which generallydon’t attract as much competition on the buy-side as large platform deals.
This is great news for company owners looking to sell. If you are considering selling a $5M+ revenue business, chances are good that one or more private equity firms would be interested in adding your business on to one of their platform companies. If you are looking to divest all or part of a company, now is the time to learn what it takes to properly position your company for a successful exit.
Understanding what sophisticated investors are looking for is key to ensuring that you don’t leave money on the table when you sell your business. For a discussion about whether your company is a candidate for selling to a private equity backed company, or to explore how you can develop your company into an acquisition target for this type of investor, Email or call Al Statz, 707-778-2040, in total confidence.

Please don’t tell me liquidation is my best exit option!

/in , /by Jim Leonhard
While the typical premise of value in valuing an operating business for a sale/acquisition or exit planning is as a going concern, occasionally, facts and circumstances indicate that an owner would be better off liquidating his or her business.  Unfortunately, this often comes as a shock to an owner who has spent years working in and building a business with the expectation that it can be sold for enough to provide a significant nest egg for retirement.
When and why is liquidation the best course of action?
Fundamentally, liquidation is the best option for an owner-operator when the assets can be sold off or liquidated in an orderly fashion for more money than a rational, well informed buyer would likely pay for the company as an operating business. This is usually the result of the business, as structured, not being profitable enough to pay a new working owner adequate compensation for their labor and yield a reasonable return on their investment (down payment, working capital injection, and closing costs). It can also be the result of exceptionally high risk inherent in the business.
The failure of a business to afford a fair wage to the working owner is an immediate red flag.  Why is the owner willing to be under compensated?  In theory, he or she would be better off liquidating the business and working for someone else.
Sometimes a lack of profitability manifests itself as the business paying no rent or below-market rent on a facility that the business owner or his family owns.  If the business were suddenly burdened with a market rent, as would be the case for a new business owner, the business becomes much less profitable or unprofitable. The owner might be better off liquidating the business and renting the real property to another company.
An example of exceptional business risk is the inability to secure a long-term lease for a location-dependent business.  This problem is particularly acute for retail businesses whose sales can suffer dramatically from relocation, or a business with a very high investment in tenant improvements or equipment installation, such as car washes and food processing businesses.
We frequently uncover these issues and many others in our business valuation and M&A brokerage work, particularly with mature family-owned businesses. Fortunately, with sound business/exit planning, orderly liquidation can often be avoided.
For more information about preparing to sell and exiting your California-based business successfully, please contact Jim Leonhard at 916-800-2716 or jhleonhard@exitstrategiesgroup.com. 

Be Prepared!

/in , /by Don Ross
“Be Prepared” is the Boy Scout Motto that has served young individuals and their character development in over two hundred countries since 1907. It can also be an effective mantra for a business owner who will engage in marketing and selling a business.  A well prepared business owner plays a vital role on the transaction team and helps ensure maximum value to the shareholders and a smooth transition of ownership.
Critical components of “Be Prepared” for a business owner are the following:
● Sustain.  Continue to operate the business effectively.  Having made the commitment to sell, don’t allow your mind and spirit to “go on vacation”.  Maintain business as usual and meet or exceed your sales/profit projections.  Buyers want to invest in businesses that are running smoothly.
● Demote.  This may seem counter-intuitive to “Be Prepared”; however, it is important that you develop a management team that can operate efficiently in your absence.  The more replaceable you become in the daily affairs of the business, the more you eliminate buyer risk.
● Disclose.  Total transparency empowers the prospective buyer to make informed decisions, eliminates suspicion, and obviates potential “landmines” during negotiation and due diligence.
● Diversify. “One trick ponies” are difficult to market and sell.  You don’t want to be indispensable to the future success of the business, nor do you want to be overly reliant upon one or two customers or suppliers.  Buyers will perceive less risk when they see a well-diversified portfolio of customers and suppliers.
● Coordinate.  Your transaction team can include a business broker, accountant, attorney and escrow officer.  Work closely with them.  Make yourself available and responsive to their requests.
● Update. Current monthly financials and any significant changes in the business must be updated and forwarded to your business broker.  Remember that during marketing and negotiations, your business continues to be dynamic:  it can’t stop.  Buyers attribute greater value to a business that can provide timely, accurate reports.
● Improve and Maintain. A freshly detailed and serviced car is generally easier to market and sell.  Examine the physical attributes of your business.  Put a “fresh coat of paint” on the business: repair and replace furniture, fixtures and equipment that are integral to the business and remove those items that are inoperative or unproductive.
● Organize.  Among the intangible assets of your business that bring added value and goodwill are your company’s records.  Employment records, supplier lists, customer lists, procedural documentation, handbooks, contracts, licenses and permits, et al, should be organized and updated.  It is reasonable for a buyer to expect company records to be current, accurate and complete before the change of ownership.
To paraphrase a popular quote, “An ounce of preparation is worth a pound of cure”.  You don’t climb a mountain by starting at the top . . . you prepare, plan and perform and hopefully enjoy the trek along the way.
 
Don Ross is a business broker with Exit Strategies. He can be reached at donross@exitstrategiesgroup.com or 707-778-0210.

The ESOP Solution

/in , /by Al Statz
We are often asked about Employee Stock Ownership Plans (ESOPs) as an exit strategy. For business owners who are curious about the ESOP exit option, here are links to two recent articles that discuss ESOP basics and some of the pro’s and cons of ESOPs. Both articles are from recent issues of MERGERS & ACQUISITIONS magazine, which is published in partnership with the Association for Corporate Growth, in which I am a member.
Recaps Turn to ESOPs
ESOPs have not been a big part of the M&A discussion for many years, but a confluence of recent factors is changing that.
More sellers are turning to the ESOP as an alternative to a traditional M&A transaction, as baby boomers look to sell their businesses, tax rates continue to increase and bankers become more comfortable with the ESOP option. Also, private equity firms are more frequently willing to invest alongside an ESOP transaction, as they look for ways to  differentiate themselves while buying into high-quality companies.
ESOP Candidates Consider Strategic Buyers
Executing Employee Stock Ownership Plans (ESOPs) may become more difficult because in the current marketplace, sellers can often achieve higher multiples by selling to a strategic buyer.
“I think an ESOP works for the most altruistic of sellers,” says Robert Brown, co-founder and managing director of Chicago investment bank Lincoln International.
“The multiple that an ESOP is able to pay is typically lower than a strategic buyer,” says Jason Bolt, senior associate at Columbia Financial Advisors, which provides business valuation and other financial advisory services.

Ten Commandments of a Successful Exit

/in , /by Al Statz
The average person doesn’t realize that selling a company is often the most gut-wrenching transaction of a business owner’s life. They’ve just spent their life building the business, it’s their largest asset, and they have no training or experience in selling a business. With that as a backdrop, here are ten practical directives that will help you make better exit strategy decisions and achieve a more successful sale.
1. I shall plan ahead
Why sell? This business may be your life’s work. If you sell, what will you do next? Is your family on board? What type of lifestyle do you want and what will your expenses be? What is the most probable selling price of your business and what are your likely sale proceeds after taxes? Is that enough to fund the next chapter of your life? How will you reinvest the proceeds? The point here is to have your personal needs, goals and plans in focus before you make the final decision to go to market.
2. I shall not depend on miracles
In the privately-held business marketplace, sellers expect full value and buyers require a reasonable return on investment. It’s win-win or no deal. According to the 2014 Pepperdine Private Capital Markets Survey, the number one reason business sale transactions don’t happen is a gap in value expectations. Over-valuing your business leads to mistakes in judgment and poor decisions. So does undervaluing it. Usually there is a market-based price range for similar businesses with comparable financial performance and risk characteristics. A skilled M&A broker can often move price up in the range, but expecting a lot more usually leads to no deal. Before you go to market, spend some time and money with a qualified and objective M&A brokerage professional to assess the market value of your business.
3. I shall prepare my business
A seasoned M&A broker can also objectively evaluate your business from marketability, transferability, finance-ability and deal survivability perspectives. Then take that professional feedback to heart and address the weaknesses. Every business is unique, but here are a few common preparation initiatives:  Have financials reviewed to reduce a buyer’s perception of risk. Embark on a program to diversify the customer base (if concentrated). Delegate more to make yourself less critical to the operation. Put incentives in place to retain key employees who can facilitate a smooth transition. Legally protect intellectual property. Capture growth opportunities in a written business plan with realistic financial projections. Buyers will have their own plans, but this helps them perceive greater value. Think of exit strategy as business strategy with a specific purpose.
4. I shall not wait for perfect timing
It makes sense that the best time to maximize selling price is when business, industry, economic and capital market conditions are strong. Yet, letting go is hard to do when things are good. Don’t make the mistake of waiting too long to make your move. In my experience, owners have a tendency to hold on longer than they should. I could easily cite dozens of examples where an owner held on too long, the business lost its competitive edge, sales and earnings slid, and enterprise value declined severely. Deciding when to go to market requires uncommon objectivity, faith, and courage.
Also keep in mind that the selling process takes 9 months on average. Add time on the front end for go-to-market preparation, and add time on the back end for management transition. Call us if you’re interested in understanding likely time-frames for preparation and transition for your particular circumstances.
5. I shall help buyers buy
I know it sounds simple, yet many owners think playing hard to get and withholding information is the answer. To maximize value, businesses need to be presented with clear, supportable facts. In successful deals, a professional Confidential Information Memorandum (aka “deal book”) is presented to prospective buyers who have signed a confidentiality agreement. A fact-based CIM communicates the essential information that serious buyers need to get a firm grasp on your business, be confident in its prospects, and make solid purchase offers. A CIM presents information in the language of experienced buyers and professional buy-side advisers.
In many years of looking, I have yet to see the perfect business. A significant weakness or risk revealed early in the discovery phase is usually a manageable hurdle or a point to negotiate around, and always a big time saver. That same information revealed during negotiations or later on in due diligence becomes a catalyst for buyers to reexamine every piece of data, lower projections or increase their required rate of return (lower their price), or walk away. Also, appropriately exposing your company’s warts early in the process builds trust and credibility with buyers, which becomes an advantage in negotiations, and helps ensure that you keep your proceeds after the sale.
6. I shall have buyers competing to buy
It can be difficult to achieve full value with just one buyer at the negotiating table. When someone inquires about acquiring a business that is not for sale, that limits the negotiation to one party. Most of these inquirers don’t buy; and when one does, their purchase price is usually lower than what can be achieved in a structured M&A sale process. When an owner decides to exit, it is not uncommon for them to confide in their CPA, attorney or financial advisor. That advisor may mention, “I know a potential buyer, why don’t I introduce you?” This also leads to a negotiation of one. Buyers love exclusivity. This may not be in your best interest if your objective is to maximize selling price. Price is generally maximized in a limited auction process.
7. I shall keep my eye on the ball and my lips sealed
Some owners make the mistake of becoming distracted with selling instead of running their business, resulting in significant value erosion. When sales or earnings slide – so does selling price. There simply isn’t enough time in the day to run a business at peak performance and perform the job of selling it. Do what you do best and hire an M&A professional to run a confidential structured sale process.
Also, it is nearly impossible to maintain confidentiality when an owner attempts to sell on his own. Colleagues gossip. Word spreads fast. Employees may leave and customers may go elsewhere. Bankers and suppliers get nervous. Competitors take advantage. Then the business suffers and goodwill value declines. A competent M&A broker uses systems and procedures to maintain confidentiality and release sensitive information at appropriate times.
8. I shall not do surgery on myself
Selling a business is something you need to do right the first time. For many reasons, you improve your odds of maximizing and holding on to your sale proceeds when you engage an M&A brokerage professional that specializes in selling businesses. Here we can take a lesson from public companies and private equity groups, who wouldn’t consider a sale or divestiture without engaging an investment bank. Why? Better results, and less risk of failure. Engage a professional M&A broker to tip the experience scale in your favor, and manage the entire process for you.
9. I shall use experienced professionals
Your transition team must know the specialized business, legal and tax issues of business transactions, and they must match up against the experience level of a buyer’s advisers. Price is important, but your real goal is to maximize after-tax proceeds. Deal structures that favor you for taxes are often unfavorable to the buyer and vice versa. Are you confident in your tax adviser to help you plan for Uncle Sam, the unwanted stakeholder in any deal? Do you have an experienced transaction attorney who you can trust to negotiate post transaction risks in a commercially reasonable manner? Your end results will be better when you use qualified and seasoned professionals from the very beginning.
10. I shall not let time kill my deal
Time is one of the biggest deal killers, often when due diligence bogs down. Buyer and seller principals are busy running their businesses; attorneys, CPAs and other deal participants can also get distracted. One of the roles of an M&A broker is to establish timelines, keep the deal teams on track, and maintain deal momentum; and not let deal fatigue set in.
During the selling process, never lose sight of why you are selling, whether it is to go fly fishing, travel the world, provide financial security for family members, make charitable contributions, or some other larger purpose. It’s important to keep your big picture future in focus as you encounter the challenges and ride the emotional roller coaster of selling a business. We get it, and we’ll be with you all the way.
 
If you have questions or want a more complete understanding of any of the above directives, or to schedule a confidential consultation about selling, merging or acquiring a California business, Email Al Statz or call him at (707)778-2040.

Selling a Business Using a CRT

/in , /by Al Statz
When a business owner decides to sell or transfer ownership, the owner often thinks about achieving the following three post-transaction objectives:
1) being financially independent,
2) taking care of family members, and
3) possibly a donation to a favorite charity.
All three of these objectives can sometimes be met by setting up a Charitable Remainder Trust (CRT) – the subject of a recent article by my friend and colleague Darrell V. Arne, CPA, ASA, CM&AA covering basic CRT concepts and the mechanics involved in using a CRT in a business sale transaction.
CRT Overview
The basic concept of a CRT is that highly appreciated property (e.g. stock in a closely-held company) is donated to a Trust – naming one or more charities as the ultimate beneficiary (remainderman).
Because of the tax-exempt nature of a charitable Trust, when the CRT sells the closely-held stock, no immediate capital gains taxes are paid at the time of sale. Therefore, the trustee of the Trust has more cash proceeds to re-invest in income producing assets for the benefit of the income beneficiaries.
The former selling shareholder and spouse (Donors) become lifetime income beneficiaries of the Trust. The Donors also obtain an immediate charitable deduction (up to 30% of adjusted gross income) at the time of transfer, since the remaining Trust assets are passed to a charity upon the death of the last income beneficiary. Also, assets transferred to the charity do not subject the Donors to estate taxes.