What is an Estate Freeze?

An estate freeze is a type of estate planning tool that you can use in order to minimize taxes when you pass on your estate to a beneficiary. The basic idea behind an estate freeze is that you are going to freeze the value of your assets at a certain point and pass that on to your beneficiaries. At that point, any capital gains from the assets are going to be attributed to your beneficiaries instead of to the estate.

Example

There are several ways that you could potentially use an estate freeze. One of the most common examples of this technique involves stock ownership. If you own common stock, you could exchange it with the company that issued it for preferred stock. At that point, you are no longer going to be able to benefit from the appreciation of the value of the company through your stock. Instead, you will be able to receive dividends from the ownership of your preferred stock. The common stock will be issued to your beneficiary, and they will be able to benefit from any appreciation in the price of the stock from that point.

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