ABOUT THE COURSE

The core mechanic of an estate freeze is simple: exchange growth assets for preferred shares fixed at today's value, issue common shares to the next generation, and all future appreciation belongs to them rather than to the estate. The tax benefit is a smaller capital gain at death. The additional benefit is multiplying the capital gains exemption across family members who hold common shares. But whether those benefits materialize depends almost entirely on what happens between the freeze date and the eventual wind-up — and that sequence plays out very differently for an active business versus a corporation holding passive assets.

The Bob/Bobco example shows what goes wrong when a freeze is done on a corporation holding investment real estate. Bob freezes, passes. Common shares go to the estate. Bobco sells the real estate with a $10 million capital gain. The estate liquidates Bobco. Total tax: $4.5 million. If Bob had held the real estate personally and passed it directly, total tax would have been $2.5 million. The pipeline does not work because paying off the note leaves unclaimed NERDTOH. The capital loss plan converts a 26.5% capital gain into a 47.7% taxable dividend. There is no clean exit. The lesson: never roll personal passive assets into a corporation without modelling the full exit.

The course covers all four freeze structures and their specific tradeoffs:

• Holdco freeze: s.85 rollover of Opco shares to Holdco for preferred shares; tax‑free; crystallizes CGE; easy to implement; but Holdco between individual and Opco blocks excluded share status for TOSI, and the pipeline is complex post‑death if NERDTOH is involved
• Opco freeze: s.51, s.86, or s.85 rollover at Opco level; parent exchanges common for preferred, children subscribe to new common; no extra company, no election required for ss.51/86; children's common shares can qualify as excluded shares once 10% of value; cannot crystallize CGE
• Drop-down freeze: net assets or business transferred from Opco to a new Subco for preferred shares; selected assets only; can purify by leaving passive assets in Opco; Subco common shares potentially excluded; possible land transfer tax on real estate (affiliate exemption may apply)
• Note freeze: parent sells Opco shares to children for a promissory note; taxable transaction but capital gains exemption may cover all or most of the gain; gain spread over 5 years (10 years for SBC shares); children have immediate excluded share status; note carries prescribed rate interest or attribution applies; pipeline available for the non-exempt portion but blocked if parent has claimed or can claim CGE on those shares

The course works through four client case studies showing which structure fits which situation: Elaine (ECo may lose SBC status, children active — Holdco freeze with trust sandwich and CGE crystallization); Frank (FCo has excluded shares, children inactive but over 25 — Opco freeze with redemption program to grow common shares to 10% of value); Graham (GCo has excess investment assets, not SBC, children inactive — drop-down freeze to Subco to purify and multiply CGE); Harry and Harriet (partnership incorporated, shares sold to children on note with CGE claimed on sale and gain spread over 10 years).

Practical issues are covered directly: when to freeze (too early risks running out of funds; too late means a large gain and a short redemption runway); cash needs of the parent generation and how to fund them from salary, preferred dividends at a fixed monthly rate, or redemptions; family law exposure and why a matrimonial dispute with one child may mean leaving that child out of the freeze entirely; the s.74.4 imputed interest rule and the s.74.4 trust clause tradeoff; unequal arrangements and equalizing with other financial resources; making sure the Will is consistent with the freeze including where unredeemed preferred shares go at death and how control transfers; and the role of life insurance in funding the preferred share redemption on death.