Succession planning is vital for preserving family wealth and ensuring smooth business transitions, and estate freezes are a powerful tool under Canadian tax law. As the founder of Alexander Tax Law, I often advise clients on implementing these strategies to minimize future tax liabilities.

An estate freeze locks in the current value of a business owner’s shares, transferring future growth to successors like children or key employees, thereby deferring capital gains tax on that appreciation. This is typically achieved through a reorganization where the owner exchanges common shares for fixed-value preferred shares, issuing new growth shares to the next generation.

Under the Income Tax Act, a properly structured freeze allows for tax deferral on accrued gains, making it an effective way to cap estate taxes. For family businesses, this can align with broader estate planning goals, such as using trusts or employee ownership options introduced in recent budgets.

However, freezes must comply with anti-avoidance rules, and valuation is critical to avoid CRA challenges. In my experience, integrating freezes with other tools like estate trusts enhances long-term tax efficiency.

If you’re considering succession planning, Alexander Tax Law offers practical solutions to future-proof your business. Reach out for a consultation on implementing an estate freeze.