Succession Planning Using An Estate Freeze, Part 2

For high net worth individuals and families, taxes resulting from the disposition of an estate can be onerous and can impede a smooth transition of a business to the next generation. So-called "estate freezes" can be an effective way to enhance succession planning and  reduce or avoid capital gains tax. But estate freezing offers a number of other key tax-saving strategies as well, including income splitting, multiplying the capital gains exemption, and creditor protection.

Income splitting

The upside to diverting the future growth of your business to your kids is that any dividend income or capital gains arising from the shares in the main operating business ("Opco") will be taxed in your kids' hands. And chances are that your kids will be subject to a lower marginal tax rate than you, which results in tax savings.