Duensing Law advises business owners and individuals on estate freezes for the transfer of future growth to the next generation, minimizing probate fees and income tax upon death. Additionally, our probate administration expenses in Toronto will include a detailed plan for wealth preservation. As your advisors, we will closely work with your accountant to organize your estate efficiently, resulting in an estate freeze without adverse tax implications.
An estate freeze is one of the most complicated areas of tax planning. Numerous matters relating to tax, corporate law and matrimonial legalities may contribute to the circumstances. Accordingly, if you are thinking about conducting an estate freeze, you should consult an experienced estate freeze lawyer in Toronto.
What does an Estate Freeze include?
Under the Canadian Income Tax Act, there are three different ways an estate freeze is implemented:
- Corporate reorganization
- Share capital reorganization
- Trust freeze
The purpose of an estate freeze is to transfer the future increase in value of the assets that the initiator owns to their children, grandchildren, or in the case of a business, key employees. In Ontario, the initiator (also called the Freezor), retains the current value of their shares and defers the income taxes that have been placed on their capital gain at the time of the disposition.
Additionally, the main goal of an estate freeze is to avoid capital gains as inflation can radically increase an individual’s estate tax burden upon death.
Prior to implementing an estate freeze, there are a number of factors to consider
- The likelihood of the corporation growing value in subsequent years;
- Any required amendments to the corporation to allow for the implementation of fixed value preference shares;
- The current financial state of the corporation and its ability to meet the economic requirements after the freeze;
- The appropriate attributes of the fixed value preference shares, including redeemable and retractable shares
- Which trusted key employee will have the control of the corporation and whether they are able to implement the correct protocols for the company’s success;
Begin your estate planning and increase your chances of a successful estate freeze by setting up a complimentary consultation today.