Have you heard of an estate freeze but aren’t sure what it means—or whether it’s right for your business?
An estate freeze is a powerful tax-planning strategy that allows business owners to “lock in” the current value of their company while shifting future growth to the next generation. Here’s how it works: you exchange your common shares for fixed-value preferred shares on a tax-deferred basis. Your children—or a family trust—then receive new common shares, which capture all the future growth of the business.
This approach caps the taxes you’ll owe on a sale or at death while ensuring that your heirs benefit from the company’s long-term success.
But timing and planning are critical. Consider these key questions:
Value: Is your company’s current worth, along with your other assets, enough to support your retirement lifestyle?
Age: How old are you—and your children? Freezing too early could shift too much growth, leaving you with less than you need.
Flexibility: Using a trust can delay decisions about who ultimately receives shares—helpful if children are young, or if some are involved in the business while others are not.
Estate freezes can be highly effective when designed carefully. In many cases, insurance is paired with the strategy to cover tax liabilities and to ensure fair treatment between children who are active in the business and those who aren’t.
If you’re thinking about an estate freeze, now is the time to plan. Let’s connect soon to explore your options and see how insurance can strengthen your strategy.
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