Let’s say you’ve spent years growing a beautiful money tree. You’ve watered it, pruned it, protected it from pests (and maybe a few bad business decisions), and now it’s worth quite a bit. The thing is—this tree keeps growing, and if you don’t plan ahead, the taxman will want a big chunk of it when you pass it on.
With an estate freeze, you keep the trunk, but all the new growth—branches, leaves, and fruit—belongs to the next generation.
This means that you lock in today’s value of the business and exchange your ownership for frozen shares (think of these as the trunk—you still have it, it still holds value). Your children (or successors) get new growth shares—any future growth belongs to them.
So, as the tree keeps growing taller and fuller, that increase in value skips your estate—meaning less tax on your eventual passing, and more value passed to the next generation.
Why Do People Freeze Their Trees?
- Tax Planning: You lock in the capital gains today, so you’re not taxed later on growth you didn’t benefit from.
- Succession Planning: It gives your kids the opportunity to benefit from future growth, while you stay in control.
- Preservation: You can still get dividends or income from the “frozen trunk” while the kids climb the new branches.
If your proverbial money tree is growing fast, then an estate freeze might make sense. It’s especially useful for business owners, investors, and anyone who wants to transfer future growth without giving up current value or control.
If you are interested in this planning strategy, start by chatting with your CPA—they can confirm whether it makes sense for your situation. Once you’ve got the go-ahead, we’ll handle the legal work to put the plan in place. No fuss, no noise, just smart planning that lets your tree keep growing for the next generation.
Robin K. Mann, Associate Lawyer