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

    All of the valuable things an individual owns, such as real estate, ...
  4. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  5. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  6. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
Related Articles
  1. What Is A Will And Why Do I Need One?
    Retirement

    What Is A Will And Why Do I Need One?

  2. Getting Started On Your Estate Plan
    Options & Futures

    Getting Started On Your Estate Plan

  3. Three Documents You Shouldn't Do Without ...
    Options & Futures

    Three Documents You Shouldn't Do Without ...

  4. Skipping-Out on Probate Costs
    Retirement

    Skipping-Out on Probate Costs

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center