An estate freeze is a tax-planning strategy that locks in the current value of your business or assets for you, passing future growth to the next generation to limit future tax.
An estate freeze caps the value of your interest in a company at today's level, converting your common shares into fixed-value preferred shares, while new growth accrues to the next generation's common shares (often held through a family trust). Your eventual deemed disposition on death is limited to the frozen value, capping that tax.
Freezes are used for succession and to multiply access to the lifetime capital gains exemption across family members. They involve a share reorganisation (commonly a section 85 or 86 rollover) and must be structured carefully, and well before a sale or death, to achieve the intended result.
A business owner worth $2 million freezes at that value, taking $2 million in fixed preferred shares. Future growth, say the next $3 million, accrues to a family trust for the children, keeping that growth out of the owner's taxable estate.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
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