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Freeze the value today. Let someone else own the growth.

An estate freeze doesn't reduce your tax bill — it stops it from getting bigger every year your business keeps growing.

Death triggers a deemed disposition of everything you own, taxed at fair market value on that day. For a business owner whose company keeps growing, that means the tax bill keeps growing too — every year you wait, it's calculated on a higher number. An estate freeze is the standard way to stop that clock.

The mechanism

You exchange your current common shares — the ones with unlimited upside — for new preferred shares fixed at today's value. New common shares, worth almost nothing today, get issued to your children or a family trust. From that point forward, all future growth in the business accrues to the new common shares, not to you. Your eventual tax bill is based on the frozen preferred share value, not whatever the business grows into.

This is usually done under section 85 (a rollover requiring a formal election, allows a partial freeze) or section 86 (a straight share-for-share exchange, no election needed, but requires exchanging your entire class of shares). Both are tax-deferred — no tax is triggered by the freeze itself.

Where the growth actually goes, and why a trust usually holds it

New common shares almost always go to a family trust rather than directly to children — giving flexibility to decide exactly how much each beneficiary eventually receives, and access to multiple Lifetime Capital Gains Exemptions when those growth shares are eventually sold.

Using the example above: $4,000,000 of growth split across three children's trust beneficiaries has three $1,275,000 LCGEs available — $3,825,000 in total. That's most, but not quite all, of the growth fully sheltered — a genuinely useful, but not unlimited, benefit worth modelling precisely rather than assuming it covers everything.

You keep control — that's the point of the preferred shares

The preferred shares aren't just about value — they typically carry voting rights or special control provisions, so the freeze doesn't mean giving up control of the business. You've frozen your tax exposure, not your authority.

A variant worth knowing: the "wasting freeze"

Instead of holding the frozen preferred shares until death, some owners gradually redeem them over time to fund retirement income — reducing the frozen value (and the eventual tax bill) further with every redemption, while still drawing a real income from the business they built.

What makes or breaks a freeze

• The 21-year rule still applies to any family trust holding the new growth shares — see our dedicated article on family trusts for what that means and how it's typically managed.
• Timing matters. Freezing when the business is worth $2 million captures much more future upside for the next generation than freezing at $8 million — earlier generally means more value transferred, assuming the business keeps growing.
• It's not reversible casually. Unfreezing (or adjusting) a freeze after the fact is possible but adds real complexity and cost — this is a decision to make deliberately, not provisionally.