SECTION 86 ESTATE FREEZE
BUSINESS LAW, TAX
Author: Jumi Odepe
Section 86 Estate Freeze
Section 86 estate freeze is a strategic financial planning tool for individuals seeking to preserve wealth for future generations. Established on section 86 of the Canadian Income Tax Act ("ITA"), estate freezes allow taxpayers who are current shareholders in a corporation to lock in the current value of their assets for tax purposes and transfer future appreciation in the value of those assets to their beneficiaries. Any increase in asset value occurring after the freeze date is attributed to the successors rather than the current shareholders. The effect is that the value of the asset’s future growth will not be taxed in the hands of the current shareholder at the time of sale or death but will be taxed in the hands of the successors/beneficiaries.
To facilitate the freeze, the original shareholder exchanges existing shares for new shares of a different class, usually benefiting the beneficiaries with more favorable capital gains treatment.
- Jumi Odepe, Principal Lawyer, Jode Law
Estate Freezes are extremely complex and facilitating them correctly requires the support of a lawyer and accountant or tax advisor. The business lawyers at Jode Law understand the Canadian business law landscape and can support you in carrying out a corporate reorganization based on Section 86 of the ITA, contact our business lawyers today via email at lawyers@jodelaw.ca
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