Estate freezes popular succession plan

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TORONTO, Ont. – If you wish to pass your company onto your children, you may want to explore the option of an estate freeze, advised Wenda Yenson, estate lawyer with Dickson MacGregor Appell LLP. An estate freeze allows you to pass your business onto the next generation while still maintaining control of the company.

Simply put, fair market value is established at the beginning of the freeze and all future growth goes to the next generation.

Basically, the owner exchanges their shares for shares that will not grow in value.

The heirs, however, hold preferred shares which will continue to increase in value as the company grows.

The current owner retains his or her ability to make decisions and oversee the company.

Yenson said there are several reasons to explore the option of an estate freeze: The freezor knows what the capital gains hit and tax liability is going to be; it allows for income splitting with a spouse or adult children; the owner maintains control with voting shares; it multiplies access to a $500,000 capital gains exemption; and it allows your children to participate in the future growth of the company.

Overall, Yenson said estate freezing is a cost-effective and flexible tool that keeps more wealth in the family as a whole.

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