Share Exchange | Preferred Shares | Beneficiaries | Twenty One Years
What a freeze actually does.
It caps the value in your hands at today's figure.
Future growth accrues to the new shares, typically held by a trust.
It makes the liability on death calculable rather than open ended.
It commits you to a structure that is expensive to unwind.
Quick Answer
What is an estate freeze and why would a business owner do one?
In an estate freeze the owner exchanges their common shares for preferred shares fixed at the current value of the company, and new common shares are issued, usually to a family trust, so that future growth accrues to the next generation rather than to the owner. The purpose is to cap the value that will be in the owner's hands on death, making the tax liability calculable and fundable, while allowing the business to keep growing without increasing that liability. It is a planning structure with real consequences and should be undertaken with legal and tax advice together.
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THE MECHANICS
Fixing Today, Redirecting Tomorrow
The owner exchanges existing common shares for preferred shares with a fixed redemption value equal to the current fair market value of the company. That value is now frozen in the owner's hands and will not grow further.
New common shares are then issued at nominal value. Because the existing value has been captured by the preferred shares, the new commons start at close to nothing and capture everything the business earns from that point forward.
A valuation supports the freeze and matters a great deal. If the frozen value is set too low the arrangement can be challenged; too high and the owner has frozen more value than necessary. This is not a step to take on an estimate.
WHY A TRUST
Flexibility About Who Benefits
The new common shares are frequently issued to a discretionary family trust rather than directly to children. The reason is that the owner rarely knows today which child will be involved in the business in fifteen years, or who will be married, divorced, or in financial difficulty.
A discretionary trust lets those decisions be made later by the trustees, within a defined class of beneficiaries. It can also provide a measure of protection where a beneficiary's marriage breaks down, though that protection is not absolute and depends heavily on how the trust is administered.
The trust deed matters more than most clients expect. Who the trustees are, what powers they hold, who can appoint and remove them, and who falls within the beneficiary class are the terms that decide whether the structure does what it was intended to.
THE COMMITMENTS
What You Give Up and What You Must Remember
A freeze is not costless. Unwinding or refreezing is possible in some circumstances and is expensive, so it should be entered into with a settled view of the future rather than as an experiment.
Trusts also have a finite planning horizon. There is a deemed disposition rule that applies to most trusts on a defined anniversary, and failing to plan for it can create a substantial and entirely foreseeable liability. Diarise it from the day the trust is created.
A freeze also does not make a business immune from a family law claim, an oppression claim, or a dependant support claim. It changes the shape of the ownership. It does not remove the underlying obligations.
HOW WE WORK
What to Bring, and What to Expect
Bring the minute book, the current share structure, recent financial statements, the existing will and any current trust deed. Bring a clear account of who is involved in the business and who is not.
Expect the work to be done jointly with your accountant. A freeze is a tax driven structure implemented through corporate steps, and it cannot sensibly be designed by either profession alone.
Expect an honest answer about whether you need one. A freeze suits a business with meaningful value and a real expectation of growth. For a company whose value is modest or declining, it can be an expensive solution to a problem that does not exist.
Common Questions
Frequently Asked Questions
What is an estate freeze?
An exchange of common shares for preferred shares fixed at current value, with new common shares issued so that future growth accrues to the next generation, usually through a family trust.
Why use a trust rather than giving shares to my children?
A discretionary trust allows decisions about who benefits, and how much, to be made later by trustees. Giving shares directly commits today to an allocation you cannot know is right.
Can a freeze be undone?
In some circumstances a structure can be unwound or refrozen, but it is expensive and complex. It should be entered into with a settled plan rather than as an experiment.
Does a trust protect shares from a divorce?
It can offer a measure of protection, and it is not absolute. Control, distribution history and administration all affect how a discretionary interest is treated on a separation.
Is there a deadline I need to remember?
Yes. A deemed disposition rule applies to most trusts on a defined anniversary. Planning for it well in advance avoids a foreseeable and substantial liability.
Start My Enquiry
Talk to Us About Estate Freezes and Family Trusts
Our lawyers implement freezes and trust structures alongside your accountant. Call, email, or arrange a consultation. Bring the minute book and recent financial statements.
Lexaltico LLP
Downtown Toronto
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North York
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“I had the absolute pleasure of working separately with two lawyers from Lexaltico — Pooja Lassi and Matthew Ram — on different matters. The level of professionalism, expertise, and care demonstrated by each of them was consistently exceptional. They do not simply service your needs — they take the time to thoroughly understand your situation and proactively problem-solve.”
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★★★★★
“I had the absolute pleasure of working separately with two lawyers from Lexaltico — Pooja Lassi and Matthew Ram — on different matters. The level of professionalism, expertise, and care demonstrated by each of them was consistently exceptional. They do not simply service your needs — they take the time to thoroughly understand your situation and proactively problem-solve.”
SJR
Planning beyond a simple will
Related pages
Trusts, company shares, assets in another country, and the decisions a standard will does not reach.
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Failure to commence proceedings within applicable limitation periods may permanently bar your claim. In Ontario, the general limitation period is two (2) years from discovery under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. Seek legal advice promptly.
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This website is not an emergency service. Enquiries sent through a form here are read during
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Using this website, submitting a form, sending an email or speaking to us on the telephone does
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Do not send confidential or sensitive information through this website or by email until we have
confirmed in writing that we can act for you. Information sent before that point is
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someone else, in a connected matter.
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We aim to reply within 2 business days. Contacting us does not guarantee a reply within any
particular period, does not oblige the firm to act, and does not stop, extend or satisfy
any limitation period, filing date or court deadline.
Our telephone line
Our line is answered 24 hours a day, every day of the year. Outside office hours calls are taken
by our intake service, who record your details and pass them to the firm. A lawyer responds during
the next business day, or sooner if the matter is urgent. Answering the telephone is not the same
as giving legal advice, and no relationship arises from that call.
Who we are and how we are regulated
Law Society of Ontario
Lexaltico LLP is regulated by the Law Society of Ontario under the
Law Society Act, R.S.O. 1990, c. L.8. All lawyers practising in
Ontario through the firm are members in good standing.
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Alberta matters are handled by lawyers licensed with, and in good standing with, the
Law Society of Alberta. A lawyer licensed in Ontario is not thereby licensed in
Alberta, and the reverse is also true.
Immigration regulation
Immigration consulting is provided by Regulated Canadian Immigration Consultants
in good standing with the College of Immigration and Citizenship Consultants under the
College of Immigration and Citizenship Consultants Act, S.C. 2019, c. 29,
s. 292.
Lawyers, paralegals and consultants
Not everyone at the firm is a lawyer.
Licensed paralegals in Ontario may act only within the scope the Law Society
permits, which does not include most family, estate or criminal matters.
Immigration consultants are regulated by the College, not by a law society,
and are not lawyers.
Law clerks and managers support files but do not give legal advice.
Each page and biography states which applies. Ask at the outset who will handle your matter and
under which licence.
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We serve clients in thirteen languages. Every page of this website is written and published in
English. Where anything is provided in another language, the English
version governs in the event of a difference. If you need an interpreter, tell us when
you book and we will arrange one.
Fees
The initial assessment
The no-obligation initial assessment is a brief introductory
conversation. It does not include a review of your documents and does not constitute
legal advice.
The firm charges a fee for substantive consultations, including in civil litigation,
criminal defence and immigration matters. The firm may waive that fee at its discretion.
Any fee is disclosed in advance and credited in full toward your account if you retain the
firm.
Referral fees
Where we refer a matter to another firm, including through LexKonnect, we comply with Rule 3.6-6.1 of the Law Society of Ontario’s Rules of Professional Conduct. Any referral fee is set out in the Law Society’s standard referral agreement, signed by you before the referral proceeds, and no fee is payable to us unless and until the receiving firm has been paid for its work. You are never obliged to accept a referral and are free to retain any firm you choose. No referral arrangement affects the independent professional judgment of any lawyer at this firm.
What is published on this site
Calculators and estimators
They produce estimates from what you type and cannot know the rest. They do not
account for the terms of your contract, statutory exceptions, or the discretion a court will
apply. Do not make a decision on a number produced by a calculator.
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Any outcome described happened on its own facts, before its own decision maker,
under the law as it stood at the time. Past results do not predict or guarantee the result of any
other case.
Reviews and testimonials
Reviews shown here are written by third parties and published on platforms we do not control. Each
describes one person’s experience of one matter. They are not a promise, a
prediction or a guarantee about any other matter.
Links to other websites
This site links to regulators, courts, government sources, professional associations and social
platforms, all operated by others. We do not control them, we are not responsible for
their content or accuracy, and a link is not an endorsement.
Other notices
Limitation periods
Failure to start a proceeding within the applicable limitation period may permanently bar
your claim. In Ontario the general period is two years from discovery
under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
Shorter periods apply to many claims. Seek advice promptly. Nothing on this website extends a
limitation period.
Accessibility
We aim to meet the Accessibility for Ontarians with Disabilities Act
and WCAG 2.1 Level AA. If any part of this site prevents you from reaching us, telephone
+1 416 333 6200 or write to
hello@lexaltico.com and we will provide the information
in another format, at no charge.
