Lydia Moulder and Danny Zich
VANCOUVER ISLAND – If you are a sole shareholder in common shares of a private company that has appreciated over time and you expect it to continue to appreci-ate, you may want to consider an estate freeze. An estate freeze is aa tax planning strategy that allows the common shareholder to lock in or “freeze” the value of appreciating shares.
The intent is to transfer the future growth of the assets to other taxpayers, usually family members or employees who are interested in taking over the business. The most common way to carry out an estate freeze is for the common shareholder to exchange the common shares to preferred shares with a fixed value of the common shares. At the same time, the company issues new common shares to the new shareholders chosen by the sole owner.
An estate freeze works best when you want to achieve one or more of the following objectives:
• You want to minimize and defer tax.
• You operate a business and have family members or employees to take over the business after you retire or after your death.
• You wish to income split with family members or employees who are in a lower tax bracket.
• You own a company that has grown in size where you would like to use all of your lifetime capital gains exemption (LCGE) which is currently $913,630.00.
• You reside in a jurisdiction with high probate fees, which is currently 1.4 per cent in British Columbia.
Implementing an estate freeze can be very complex. It’s important to use a tax professional who knows the technical tax rules. Also, there will be legal and accounting fees to implement an estate freeze. Make sure you start early to ensure that you can transfer any capital gains to your intended beneficiaries.
If this strategy is right for you, don’t hesitate to contact me, an estate and trust specialist with Concentra Trust and Coastal Community Private Wealth Group, at danny.zich@concentra.ca or my estate and trust associate with Coastal Community Private Wealth Group, Lydia Moulder at lydia.moulder@cccu.ca.
This article is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice, and should not be relied upon for providing such advice. Reasonable efforts have been made to ensure that the information contained herein is accurate, com-plete and timely, but the information contained in this article is subject to change without notice or may be unsuitable for certain uses. Concentra Trust accepts no responsibility or liability for the accuracy, reliability, currency, or completeness of the article and will not be responsible for any losses incurred by any party as a result of its reliance on the article.
