An estate freeze in New Brunswick generally takes 3 to 6 months to complete. It involves freezing the current value of your corporate shares, allowing future growth to transfer to the next generation tax-free. Legal and accounting fees typically range from $8,000 to $20,000 CAD depending on complexity.
For family business owners in New Brunswick, passing the company to the next generation without triggering a massive tax bill is a major concern. An estate freeze allows you to lock in the current value of your business for your own tax purposes, passing all future growth-and future tax liabilities-to your children or a family trust. Whether your business operates in Moncton, Fredericton, or Bathurst, this strategy relies heavily on Canada Revenue Agency (CRA) guidelines and the Business Corporations Act of New Brunswick.
This comprehensive guide will explain the step-by-step process of an estate freeze, how much it typically costs, and why working with a local corporate law firm and a chartered accountant is essential for a smooth transition.
Step-by-Step Process for an Estate Freeze in New Brunswick
Executing an estate freeze is a highly technical legal procedure. It requires careful coordination between your legal advisors, accountants, and the provincial registry. Here is the standard path most business owners follow.
Step 1: Determine the Current Value of the Business
Before you can freeze your shares, you must determine exactly what your business is currently worth. You cannot simply guess this number; the CRA requires a formal, objective valuation. You will need to hire a Chartered Business Valuator (CBV) to thoroughly review your financial statements, physical assets, and market position.
Having an accurate valuation is critical to prevent future audits . If the CRA determines you undervalued the company during the freeze, you could face severe financial penalties and retroactive tax assessments.
Step 2: Reorganize Your Corporate Shares
Once the value is firmly established, your lawyer will restructure your company’s share capital. Most applicants use a “Section 85 rollover” under the federal Income Tax Act. This allows you to exchange your current common shares (which grow in value) for new preferred shares that have a fixed, frozen value equal to the company’s current worth.
Because these new preferred shares will not increase in value, your personal capital gains tax liability upon death is effectively locked in 🔒. New common shares are then issued to your children or a trust at a nominal cost.
Step 3: Establish a Family Trust (Optional)
Instead of giving the new common shares directly to your children, many business owners in New Brunswick choose to have a Family Trust hold the shares. This provides an excellent layer of legal protection.
By acting as the trustee, you can retain full voting control over the company while your children act as the beneficiaries . This protects the shares from your children’s potential future creditors or spouses in the event of a divorce.
Step 4: Finalize Filings with CRA and SNB
The final step involves extensive paperwork. Your lawyer must update your corporate minute book and file Articles of Amendment with the Service New Brunswick (SNB) Corporate Registry to officially recognize the new share structure.
Simultaneously, your accountant will file the necessary tax election forms with the CRA to ensure the rollover is recognized as a tax-deferred event. Missing these strict filing deadlines can completely invalidate the freeze.
| Share Type | Before the Freeze | After the Freeze |
|---|---|---|
| Parent’s Shares | Common Shares (Growing Value) | Preferred Shares (Fixed Value) |
| Children’s Shares | None | New Common Shares (Future Growth) |
| Voting Control | Held by Parent | Usually retained by Parent via Trust |
How Much Does it Cost in New Brunswick?
An estate freeze involves significant professional fees, but the potential tax savings often measure in the hundreds of thousands of dollars:
- Business Valuation: A formal appraisal from a certified CBV typically costs between $3,000 and $7,500 CAD.
- Accounting Fees: Your accountant will charge to calculate the exact tax implications and file the CRA elections, usually ranging from $3,000 to $8,000 CAD.
- Legal Fees: A business lawyer will draft the corporate reorganization and trust documents. This usually requires a retainer of $5,000 to $15,000 CAD.
- Provincial Registry Fees: Filing amended articles with SNB involves minor administrative fees of approximately $100 to $200 CAD.
How Long Does the Process Take?
A standard estate freeze for a New Brunswick business generally takes 3 to 6 months from start to finish. The valuation phase alone can take 4 to 8 weeks, depending on how quickly you provide your financial records. Drafting the trust and completing the complex corporate restructuring usually adds another 2 to 3 months to the timeline.
Frequently Asked Questions (FAQ)
Do I lose control of my business after an estate freeze?
Generally, no. Most business owners structure the freeze so they retain special voting preferred shares, or they act as the primary trustee of the family trust holding the new shares, allowing them to continue running the company.
Can an estate freeze be reversed later?
Yes, it is possible to “thaw” or reverse a freeze if your financial circumstances change, but this is a highly complex legal process that can trigger unexpected tax consequences with the CRA.
Is an estate freeze only for massive corporations?
Not at all. Many successful small and medium-sized family businesses in New Brunswick utilize this strategy to ensure a smooth, tax-efficient transition to the next generation.
What happens if I don’t freeze my estate?
Upon your death, the CRA treats your shares as if they were sold at fair market value. Your estate will owe massive capital gains taxes on all the growth, which often forces families to sell the business just to pay the tax bill.
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