Mr. and Mrs. Lee hold shares in a private operating company. Mrs. Lee is 45, and Mr. Lee is 50. The company's value is expected to grow significantly. They wish to transfer the future growth of the company to their adult children while retaining control and current income. Which estate planning strategy is most suitable for achieving these goals?

Question: Mr. and Mrs. Lee hold shares in a private operating company. Mrs. Lee is 45, and Mr. Lee is 50. The company's value is expected to grow significantly. They wish to transfer the future growth of the company to their adult children while retaining control and current income. Which estate planning strategy is most suitable for achieving these goals?

Answer options:

• Establishing an inter vivos trust for their children and transferring existing shares. ✅ Implementing an estate freeze, where the parents convert their common shares to fixed-value preferred shares and new common shares are issued to the children.
• Updating their wills to explicitly state that all future growth of the company's shares is to be inherited by their children.
• Gifting common shares directly to their children to avoid future probate fees.

Correct answer: Implementing an estate freeze, where the parents convert their common shares to fixed-value preferred shares and new common shares are issued to the children.

Explanation: An estate freeze using preferred shares for the parents and common shares for the children is designed to 'freeze' the value of the parents' interest in the company while transferring all future growth to the children, often accompanied by a new shareholders' agreement to retain control.