Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, May 21, 2020

Why an Estate Freeze Makes Sense Now

Estate_freeze@2x_opt The U.S. dollar has appreciated against the Canadian dollar by close to 9 per cent. As of May 19, the S&P/TSX has recovered more than half of its losses while the Canadian dollar remains down by more than 5% compared to its value on February 21. This has caused Canadians to update their estate plans to ensure that their last will and testament is current. Further, they are learning how they can pass along their wealth to their children or beneficiaries with the least amount of tax on death. Given the global public health crisis due to COVID-19 and its economic impact, now is a perfect time for tax planning using an estate freeze.

The recent dip in the stock market and the Canadian dollar has actually sprung new estate planning opportunities. Canadian residents have begun to use a tax plan known as an estate freeze. In an estate freeze you essentially take certain assets that you own today, freezing the tax on death at today’s value, retaining the voting control while passing future growth to children or other designated beneficiaries.

In Canada, when one dies they are assumed to have sold all of their assets before they died, with the exception of spousal transfers. Even though the consequences are not as harsh in the United States, this provides plenty incentive in freezing the values of your estate today as opposed to the higher value it will be at the time of your death. 

The freeze must be valued at fair market value, which is very low at the moment given the economic crisis we are in due to the pandemic. This means huge tax savings for your future estate, which means better financial security for your family!

See David Altro & Bradley Richard Thompson, Why an Estate Freeze Makes Sense Now, Globe Mail, May 20, 2020. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.


Current Events, Estate Planning - Generally, Estate Tax, Wills | Permalink


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