Estate Freeze Strategy: Minimizing Estate & Gift Taxes

Using an estate freeze strategy can help you minimize estate and gift taxes. The basic idea behind using an estate freeze strategy is to minimize estate taxes or gift taxes. If you simply give all of your estate to your beneficiaries before you die, you will most likely incur gift taxes for total amount. If you just try to pass your estate onto your beneficiaries when you die without making any preparations, your beneficiaries could have to pay estate taxes. With the estate freeze strategy, you will use a variety of tactics in order to try to eliminate the taxes that your beneficiaries will have to pay.


If you own a substantial amount of stock, you can utilize the estate freeze strategy to transfer the stock to your beneficiaries. With this method, you are going to exchange your common stock for preferred stock with the company that issued it. The company will then give shares of common stock to your beneficiaries. Since you are trading common stock for preferred stock, you will not have to pay any capital gains taxes on this exchange. The preferred stock is not going to increase in value from that point, so you will not have to worry about capital gains taxes in the future. Your beneficiaries will receive common stock and they will be able to benefit from the growth of the stock in the future.


You might also choose to set up an irrevocable trust to utilize an estate freeze strategy. With this type of trust, you will move all of your assets into the ownership of the trust. When you do this, you will not have to pay any gift taxes personally. Then, whenever you pass away, the assets inside the trust can be passed onto your beneficiaries without incurring additional taxes. Make sure that the trust is irrevocable, because assets in a revocable trust will count towards your total estate value.

Family Limited Partnership

Another tool that you can use is called a family limited partnership. You can put assets into the ownership of the partnership. You will name yourself as the general partner and your beneficiaries as limited partners. You will then be able to decrease your ownership in the partnership to 1 percent. The limited partners will then have 99 percent ownership in the partnership and all of the assets in it. Another benefit of utilizing this strategy is that the assets in the family limited partnership will not be available to creditors in the future. This will help protect your assets and it will allow you to pass them onto your beneficiaries without worrying about paying excessive estate or gift taxes.

Gross Estate

The gross estate of an individual is basically everything that she has at the time of her death. This includes any real estate, any personal property, any cash and any investments that she might have owned. The gross estate is not lowered by any type of deductions or allowances. It is simply calculated by taking the value of everything that the person had when she died and adding it together. This figure is generally important for certain aspects of filing federal income taxes. It can also play a role in estate tax issues.

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