May 1, 2020

Author: The Link Between

During these unprecedented times, the value of your business or other assets may have dropped 10%, 20%, 30% or more. While this result can be devastating right now, a small silver lining may be that there are some steps you can take today to reduce future taxes. For example, estate freezes are common planning tools that may have particular value in the current economic environment.

The Estate Freeze

An estate freeze minimizes the tax payable on the death of a shareholder by “freezing” the value of his or her shares, and shifting the future growth in value of the corporation to the next generation. The process usually consists of one or both parents exchanging their common shares, on a tax-deferred basis, for fixed value preferred shares. The lower value of businesses in today’s market may present an opportunity to reduce the tax liability on the parents’ death and potentially transfer more wealth to the next generation on a tax efficient basis when the economy recovers. Common shares issued under the freeze can be given to the children.  If the parents are uncertain as to which child should own shares of the corporation, or wish to have flexibility for the future, a family trust could be used to hold the shares on behalf of the children, other family members (including the parents), and even a family holding company.

If you have previously done an estate freeze, then it may even be worth considering a ‘re-freeze’ under certain circumstances. There are many complex rules that apply to any kind of estate freeze though, so it is imperative that you obtain advice and input from professional tax and legal experts. 

There are other opportunities that may exist in the downturned market, such as selling assets to family members to realize losses to offset capital gains realized in the year or prior years (while being careful of the ‘superficial loss’ rules and the impact on a corporation’s capital dividend account). Additionally, purifying a corporation so it can qualify for the qualified small business capital gains exemption. Once again, it’s important that you work with an advisor as well as professional tax and legal experts for strategies such as these.

likelike
likedislike
Posted ON Mon, October 25, 2021 at 10:29:22 am MDT    Comments (0)
RSS
No Comments.
Add Comment
*Name:
Url:     http://
*Comments:
*Verify:
verify
* Required Fields

Mutual funds, approved exempt market products and/or exchange traded funds are offered through Investia Financial Services Inc.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Jason Desaulniers who is a Investment Funds Advisor at Excalibur Executive Planning Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

Version 5.3.1
Site Map | Login | Powered By: Techweavers Inc.