Estate Freeze: A Strategic Approach to Business Succession Planning | Estate Planning

Estate Freeze: A Strategic Approach to Business Succession Planning

Navigating the complexities of business succession and tax planning can be a daunting task for business owners. One effective strategy that often comes into play is the “estate freeze.” This approach is particularly beneficial for those looking to pass their business to the next generation, like a child, in a tax-efficient manner. In this blog, we’ll dive into what an estate freeze is, how it works, and the benefits it offers to both the current and future business owners.

What is an Estate Freeze?

An estate freeze is a tax and estate planning strategy designed to “lock in” the current value of your business for tax purposes. By doing this, it ensures that any future growth in the business’s value accrues to the next generation—such as your child—rather than to you, the original owner. This strategy facilitates a more tax-efficient transition of business ownership, making it a vital tool in business owner insurance and succession planning.

How Does an Estate Freeze Work?

Think of an estate freeze as hitting the “pause button” on the current valuation of your business. Here’s how it unfolds:

  1. Valuation: A valuation is conducted to determine the current worth of your business. This value is then “frozen,” and as the original owner, you receive “preferred shares” equivalent to this frozen value.
  2. Transfer of Growth: The next generation, like your child, gets “growth shares” that will capture the future growth of the business.

This process ensures that the business owner locks in their value while transferring the potential appreciation of the business to the next generation, thus minimizing future tax liabilities.

Who Benefits from the Growth?

The biggest winners in an estate freeze are the future owners, like your children. They receive “growth shares,” which increase in value as your business grows after the freeze. This means that all new value your business gains will belong to them, facilitating an efficient and tax-effective transfer of ownership.

How Can Insurance Help?

Insurance plays a critical role in estate freezes by providing the exact amount of money needed to cover the capital gains tax liability when it’s needed—at the time of death. This type of business owner insurance is often held in the corporation, ideally in a HoldCo, or a corporation that will never be sold and will be passed on to the next generation. Additionally, a Joint Last to Die policy is typically considered for this type of estate planning. This is because spousal roll-over provisions allow the tax-free transfer of assets to the surviving spouse, delaying the tax liability until the death of both parents.

An estate freeze is a powerful tool in business succession planning, providing a structured and tax-efficient method to transfer a business to the next generation. Coupled with strategic business owner insurance, it ensures a smooth transition without the burden of unexpected tax liabilities.

Benefits of an Estate Freeze

  1. Tax Efficiency: By locking in the current value of the business, the future appreciation is transferred to the next generation, minimizing the tax burden on the estate.
  2. Certainty in Planning: Knowing the potential tax bill upfront allows for better planning. Business owner insurance can be strategically used to cover these taxes, ensuring that the business and family are not burdened by a large tax liability later.
  3. Smooth Transition: An estate freeze ensures a seamless transition of ownership, providing stability for the business and its operations during the changeover period.
  4. Preservation of Wealth: The strategy helps preserve the business owner’s wealth, ensuring that the maximum possible value is transferred to the heirs.

Steps to Implement an Estate Freeze:

  1. Consultation with Advisors: Work with financial, tax, and legal advisors to understand the implications and benefits of an estate freeze.
  2. Business Valuation: Conduct a thorough valuation of your business to establish its current worth.
  3. Share Structure: Restructure the business shares, issuing preferred shares to the current owner and growth shares to the heirs.
  4. Insurance Planning: Set up the necessary business owner insurance policies, such as a Joint Last to Die policy, to cover future tax liabilities.
  5. Documentation and Compliance: Ensure all legal documents are in place and compliant with tax regulations.

Why Choose SecurePlan for Your Estate Freeze?

At SecurePlan, we specialize in guiding business owners through complex succession planning strategies, including estate freezes. Our expertise in business owner insurance ensures that all aspects of your plan are covered, providing peace of mind for you and your family. We coordinate with other professionals to ensure a smooth and successful implementation of your estate freeze.


An estate freeze is a powerful tool in succession planning, providing a structured and tax-efficient method to transfer a business to the next generation while offering significant benefits and options for the current owner. This strategy requires careful consideration and planning, ideally with the guidance of experienced financial, tax, and legal advisors. At SecurePlan, we can serve as the quarterback, coordinating with other professionals to ensure a smooth and successful implementation.

If you’re considering an estate freeze for your business succession plan or want to explore other strategies, feel free to contact us. Together, we can ensure a smooth and tax-efficient transition for your business legacy.

Disclaimer: This blog provides general information, and readers should seek personalized advice from legal, tax, and financial professionals. Estate freezes can be complex and vary greatly depending on individual business and family circumstances.