Succession planning is commonly known as estate freezes or passing the lantern from the previous generation to the current generation. It is a commonly used technique to transfer the family business without adverse tax consequences. Many books have been written on succession planning. Accountants, lawyers, financial advisers and consultants often suggest successful business owners to implement an estate freeze.
One cannot just “hand-down” the business from parent to child without triggering the income tax act. Improperly done can result into severe an adverse tax consequences to the transferor and/or transferee. Business owners should and ought to seek proper legal and tax advise before passing the business.
Sometimes, the primary goal of an estate freeze is not to effect a transfer of the business but to effect income splitting.