Estate freezing

Estate freezing is a tax planning method of transferring ownership of a non-incorporated business's assets to another business entity. It implies the arrival of new shareholders who will benefit from future business growth. It allows business owners to:

• transfer to the people of their choice (children, grandchildren, key employees) the holding gains of shares held in the company
• maintain current share values
• defer capital gains taxes until the moment of their disposition

Entire estates or a portion of estates may be frozen. Business owners can thus transfer their business to the next generation while maintaining control over the company, and, if applicable, continue earning dividend income on the frozen shares.

The shareholders agreement

An estate freeze requires a shareholder agreement be drawn up. The agreement spells out how shares can be disposed of, i.e., whether they can be bought, bought back or transferred.