ESTATE FREEZE - income tax,

-
My question is: Canadian-specific
QUESTION: Is estate freezing an effective way to pass on real estate in a
corporation to ones children. Does CCRA accept it?
THX
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david ingram replies:
There are estate freezes and estate freezes.  I have seen too many hassles
with the family because of an estate freeze than I have (in my opinion) seen
truly great outcomes.
If you put the kids name on the ownership and the kids get married and they
divorce, suddenly, your estate freeze has another owner.
Or, depending on the type of freeze, the kids vote dad out of the operation
although this should never happen if Dad has kept the voting control
correctly.
In general entrepreneurs who have built successful companies can consider an
estate freeze.
It can be the secret to passing your business on to the next generation with
the least tax consequences.
The method used most often involves having the Canadian controlled private
corporation (small business) reorganize its share structure.
In General, the present owner has to exchange his existing common shares for
new voting, redeemable preferred shares with the same value.
Next, the owner will create a new class of common shares, which will be
purchased by whoever you want to be the beneficiary of your estate freeze.
Those persons could be your children, a  charitable organization (not likely
because there are equally good alternatives),  grandchildren or a new family
trust for their benefit.
The future capital gain or growth in your business now belongs to the new
class of the common shares held by the children/grandchildren or family
trust.
Because of this, all future capital gains tax liability on the new shares
will be deferred until the holders "sell" their shares, rather than being
due upon your death.
A secondary value of an estate freeze is that it can predict the income tax
your estate will owe on the voting shares you still own.  Their value is
pretty definite and you can cover the tax with a life insurance policy or
start making arrangements as to what other asset may be sold or redeemed to
pay the tax upon your death..
The preferred shares can provide you with a fixed dividend (this was a
question on the radio program last Sunday) for your retirement income or, if
necessary, you can sell them off slowly to provide you with a little extra.
One of the 17 different  seminars given at Fred Snyder's office deals with
estates when Owen Dolan QC LLB comes over to speak.  Call Fred's office at
604 731-8900 to see when he has scheduled an estate seminar.
Answers to this and other similar  questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram  host a LIVE talk show called "ITS YOUR
MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
Local calls are taken at (604) 280-0600 and Long Distance calls (BC only)
are taken at 1( 866) 778-0600
Callers to the show are invited to attend free seminars on financial
planning with such specialities as deductible mortgage interest. They are
held at Fred Snyder's Office at 1764 West 7th in Vancouver - (604) 731-8900
for more information.
=========================================
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at centa.com <mailto:taxman at centa.com>
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<http://www.david-ingram.com/>
Disclaimer:  This question has been answered without detailed information or
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Ask cross-border non-resident rental real estate immigration & income tax
expert - David Ingram and Mutual Fund Expert Fred Snyder CKBD 600AM Radio
CEN-TA Services in North Vancouver BC Canada
Every Thursday evening Fred Snyder and I hold a free seminar at Fred's
office at 1764 West 7th (corner of Burrard in the Spence Diamond building)
in Vancouver.
The topics are:
  Seg funds and an alternative to the traditional RRSP.
   Making your mortgage income tax deductible
  Critical Care insurance for disasters.
coffee and cookies of course.
Phone 604-731-8900 to reserve your seat -and, you are welcome to bring your
brother, your sister, your mother or father, your children, your best
friend, your worst enemy or your own financial advisor who hasn't explained
how to make your mortgage deductible.
Another Seminar is now starting in Vancouver at 2 PM on Saturdays and yet
another in Victoria at 7 PM on Tuesday Nights.
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