ESTATE FREEZE FOR TAX-EFFICIENT WEALTH TRANSFERS
Experienced legal representation for tax planning, tax structuring and business transactions.
ROLLOVER - ESTATE FREEZE - REORG - HOLDCO - CCPC - TAX PRODUCTS
Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
An estate freeze is primarily undertaken with the intent of transferring the future growth of an asset (i.e., private company shares, investment portfolio, family cottage) to other taxpayers, while concurrently converting the current value of that particular asset to a fixed amount for the original owner. The original owner thereby freezes his/her interest, while conferring unto his family (i.e., spouse, children, grandchildren) the future growth associated with that particular asset.
When effectively structured, the original owner need not immediately divest control over the particular asset, but merely the future beneficial gains associated with the particular asset. With respect to a qualified small business, the original owner's own tax liability associated with the asset is capped (which tends to be significant given that said owners are typically of significant wealth and have a propensity to use all of their lifetime personal capital gains exemption). Conversely, the beneficiaries of an estate freeze involving a qualified small business have the potential the potential to utilize their lower tax rates together with their own lifetime personal capital gains exemption (such that where there are multiple beneficiaries, multiple use of the exemption may be undertaken, as opposed to a single usage, unless already expended on a prior disposition) .
For advanced corporate structuring and tax planning, utilizing estate freezes and other innovative wealth transfer strategies, contact our law firm to schedule a confidential initial consultation with a knowledgeable estate planning lawyer at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.
| What is a Section 85 Rollover: A section 85 rollover enables a taxpayer (the transferor) to dispose of “eligible property” to a taxable Canadian corporation (the transferee), so that most, if not all, of the tax consequences which usually arise on such a disposition are shifted to the transferee corporation from the transferor. The transferor is permitted to dispose of the property to the transferee corporation for an “agreed amount” which may be other than the fair market value of either such property or the consideration received for it. Read more . . . |
| What is a Butterfly Transaction: A Butterfly Transaction, technically known as a Divisive Reorganization, is a tax-free method of dividing up assets in a corporation into separate corporate allocations, which is commonly implemented when the shareholders are seeking to go their separate ways and thus divide out the corporation’s assets. A Butterfly Transaction can also be carried out when the corporation consists of two different businesses with a view to separating the divisions so that they are each in a separate corporation; or alternatively, to “purify” a corporation of its non-active business assets . . . Read more . . . |
| What are Capital Dividends (Tax-Free Dividends): Capital dividends are private corporation dividends that are paid tax-free to their Canadian-resident shareholders, such that no part of the dividend is included in computing the recipient shareholder’s taxable income. Read more . . . |
| Importance of Maintaining a Capital Dividend Account [for Tax-Free Dividends): A private corporation’s Capital Dividend Account is the means by which the corporation pays its resident-Canadian shareholders tax-free capital dividends. The Capital Dividend Account (CDA) does not appear on a balance sheet, although it might appear in the notes of a financial statement, where the accountants are sufficiently apprised as to the inner workings and transactions of the corporation. Read more . . . |
| What is an Eligible Dividend (Enhanced Dividend Gross Up / Tax Credit): An eligible dividend is a taxable dividend that receives an enhanced dividend gross up and an enhanced dividend tax credit and is available on dividends from either a public corporation (not entitled to the small business deduction) or a private corporation with high earnings (net income over the $500,000 small business deduction). Read more . . . |
| What is a Non-Eligible Dividend (Ordinary Dividend): A non-eligible dividend (also known as an ordinary dividend) is a taxable dividend that does not receive the benefit of the enhanced dividend gross-up and the enhanced dividend tax credit that is provided to eligible dividends. Read more . . . |
| What is a Stock Dividend: A stock dividend is a dividend paid by the issuance of shares of the capital stock of the payer corporation. The term "stock dividend" is defined as including any dividend paid by a corporation to the extent that it is paid by the issuance of shares of any class of the capital stock of the payer corporation, . . . Read more . . . |
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