Tax Brief: Estate Freezes

Issue: In Canada, when a resident passes away, there is a deemed capital disposition of all their assets, which could result in significant tax owing to the Canada Revenue Agency (“CRA”). Our clients have worked hard for their assets and they want to ensure that upon death, all of their hard work won’t be taken by the CRA in the form of taxes.

Solution: Estate freezes, one possible estate planning method, are a crucial tax planning tool our clients use in order to ensure they maximize the amount they can pass onto the next generation. With careful tax planning, clients are able to lock in a minimal amount of capital gains, minimize the potential tax owed to the CRA upon death and ensure they can maximize the amount they pass onto their heirs. And most importantly, utilizing an estate freeze helps prevent situations were our client’s children are unwillingly forced to sell estate assets they were set to inherit, in order to pay huge tax bills of their parents.

Additional benefits of estate freezes may include: (1) income splitting (2) utilizing the lifetime capital gain exemptions (3) reducing probate fees (4) protecting assets of future growth potential (5) maintaining the ability to control your corporation, while passing on the future growth to your children.

Conclusion: Estate freezes are a highly complex transaction. If not set up in the correct structure, estate freezes may result in unintended tax consequences. It is therefore advised that you seek the assistance of competent professional advisors to guide you through your particular situation and financial goals.

Have any questions? Contact Blumenfeld Woznica & Co. so that we can ensure that you are in compliance with all tax matters and maximise your estate and wealth planning.

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