Estate Freeze

AAA

DEFINITION of 'Estate Freeze'

An asset management strategy whereby an estate owner aims to transfer assets to his or her beneficiaries without tax consequence. In most estate freezes, the estate owner transfers assets, usually common stock, to a company in exchange for preferred shares. The company issues new common stock to the beneficiaries at a nominal value.

INVESTOPEDIA EXPLAINS 'Estate Freeze'

This strategy looks to avoid capital gains tax. When the owner exchanges assets for preferred stock, there will be no capital gains on the exchange. The company will give the beneficiaries new common shares at market value, so that no capital gain exists for the receiving parties. Because preferred shares are non-growth securities, the original owner will not incur future capital gains taxes on these instruments.

RELATED TERMS
  1. Widow's Allowance

    An allowance of funds and/or personal property received by a ...
  2. Life Estate

    A type of estate that only lasts for the lifetime of the beneficiary. ...
  3. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  4. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  5. Intentionally Defective Grantor ...

    An estate planning tool used to freeze certain assets of an individual ...
  6. Estate

    All of the valuable things an individual owns, such as real estate, ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Retirement

    What Is A Will And Why Do I Need One?

    Putting this document together will save your family time and money, and give you peace of mind.
  2. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  3. Options & Futures

    Three Documents You Shouldn't Do Without

    Estate planning is not just about the division of assets after you die. Read on to save your loved ones extra grief.
  4. Personal Finance

    Get Ready For The Estate Tax Phase-Out

    Changes to federal legislation will affect how your assets are treated once you're gone - be prepared.
  5. Options & Futures

    Your Will: Why You Need A Power Of Attorney And Beneficiaries

    What would happen if you were suddenly unable to manage your financial affairs? Preparation is the best protection.
  6. Retirement

    Skipping-Out on Probate Costs

    Don't let bad estate planning lead to unnecessary costs and stress for your inheritors.
  7. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  8. Professionals

    Estate Planning Tips for Financial Advisors

    Estate planning is not a set-it-and-forget-it proposition. Here are some tips for you and your clients.
  9. Personal Finance

    What's an Irrevocable Trust?

    In an irrevocable trust, the grantor gives up the right to revise, amend or terminate the trust without the permission of the beneficiary. An irrevocable trust is best used as an estate-planning ...
  10. Investing Basics

    How Advisors Can Protect Inherited IRAs

    A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center