What is an estate freeze and how does it work?

An estate freeze is an estate planning technique used to transfer future appreciation in an asset to a family member. It works by “freezing” the value of an asset at its current worth, meaning when its value increases at a later date, the increased value won’t be included in estate tax calculations. To accomplish this, a person with an asset they want to transfer to a family member will create a trust to transfer the asset to the other person. The trust document will then give the beneficiary the ownership of the asset, and the grantor will keep a life estate for the asset. This means that the grantor retains the right to use and benefit from the asset during their lifetime. However, the grantor will not be able to transfer the asset to anyone else and will not be able to make any decisions that could affect the value of the asset. When the grantor passes away, the asset will not be included in the grantor’s estate. This is because the grantor will no longer own the asset and its value will be frozen to the current value, meaning that any future appreciation in the asset will be transferred to the beneficiary. Estate freezes are commonly used in California for individuals who own assets that are likely to appreciate in value, such as a business or a piece of real estate. They can be a great way for people to transfer assets to their family members without incurring estate taxes.

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What is an estate freeze and how does it work?

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