Estate Freeze Definition: A deferment of property transfer at the time of death to avoid, reduce or transfer tax liability. Related Terms: Estate In the Harold Ballard case (1992), Justice Farley described an estate freeze as follows: "Usually an estate freeze is a mechanism to reduce the taxes which would otherwise be payable on the death of a parent by allowing appreciation of the value of the parent's assets to accrue to the benefit of the children, thereby limiting the gain that would otherwise be taxable on the death of the parent. As such a common denominator for estate freeze plans generally is the exchange of growth assets for non-growth assets. "In simple terms, an estate freeze involves valuing the assets of a corporation and issuing preferred shares to the parent having a fixed value equal to the value of the assets and common shares to the children having a nominal value. Since the preferred shares have a fixed value, all appreciation in value would accrue to the common shareholders. It is common in estate freeze transactions that the preferred shareholder continue to exercise control of the corporation notwithstanding that the continuing economic interest of the preferred shareholder in the fortune of the corporation is only to ensure that the realizable assets exceed the fixed value of the preferred shares. "It would seem to me that it would be extremely unlikely that anyone would effect an estate freeze if there were no taxes to consider (either death duties in the nature of succession taxes or taxes on capital gains at death)." In Black, the publisher's annotation were as follows: "The concept of estate freeze is rather intimidating to many family lawyers.... The form of an estate freeze is that the estate planner ... receives consideration equal to the fair market value of the assets transferred by him and the common shares received by the recipient are worth the same amount as the consideration they provided. It is in effect a trade where each receives something equal in value to what he turned over." As noted by Justice Groberman in Re Racz, an estate freeze freezes the assets in an estate and gives the benefit of future growth to others through shares and through a family trust. REFERENCES: 820099 Ontario Inc. v Harold E. Ballard Ltd. 3 BLR 2d 113 (1992); also at 1991 CarswellOnt 142 Black v Black 66 O.R. (2d) 643 (1988); also at 18 R.F.L. (3d) 303, 31 E.T.R. 188 and 1988 CarswellOnt 323 Duhaime, Lloyd, Legal Definition of Estate Re Racz 2004 BCSC 464 Find you are constantly looking up definitions? Try our search provider (works in most modern browsers) If you find an error or omission in Duhaime's Legal Dictionary, or if you have legal term suggestion, we'd love to hear from you!