Business Owner in New Brunswick with $1.5M: Share Sale and Estate Freeze Decision in 2026

The Scenario: $1.5M Estate, Three Asset Classes, One Big Decision

A 58-year-old New Brunswick business owner — call him Paul — has built an operating company over 25 years. His total estate looks like this:

Paul has two adult children. His daughter works in the business as operations manager. His son lives in Ontario and has no involvement. Paul is married, which matters for RRSP rollover at death but does not change the capital gains math on the shares. The question: should Paul freeze the estate now and let his daughter's shares grow tax-free, or sell the company outright and distribute the after-tax proceeds?

New Brunswick Probate: $7,500 on $1.5M — The Smaller Cost

New Brunswick charges $5 per $1,000 on the full estate value, starting from dollar one. There is no threshold, no tiering — flat rate across the board. On Paul's $1.5M estate, the NB probate fee is $7,500.

That is not the dominant cost here, but it is worth benchmarking against other provinces:

New Brunswick sits in the middle of the pack. The probate fee on $900,000 of shares alone would be $4,500 — and an estate freeze does not eliminate this, since the frozen preferred shares still pass through the will. What the freeze does is cap that $4,500 figure: if the business grows to $2M over 15 years, the $1.1M of growth belongs to the next generation's common shares and never enters Paul's estate. For a deeper look at provincial probate differences, see our cross-Canada probate comparison.

Capital Gains on the Shares: The Tiered Inclusion Math

Paul's operating company shares have a fair market value of $900,000 and an adjusted cost base of $100 — the nominal amount he paid when incorporating 25 years ago. Whether he sells the shares outright or dies holding them (triggering a deemed disposition under section 70(5)), the capital gain is approximately $899,900.

Under the 2026 tiered capital gains inclusion rules:

• First $250,000 of gain at 50% inclusion: $125,000 taxable
• Remaining $649,900 of gain at 66.67% inclusion: $433,267 taxable
• Total taxable capital gain: approximately $558,267

At New Brunswick's top combined federal-provincial marginal rates, this produces a tax bill in the range of $260,000–$290,000 on the shares alone — before considering the RRSP and before applying the lifetime capital gains exemption. The LCGE is the critical variable: if Paul's shares qualify as qualified small business corporation (QSBC) shares, a significant portion of that gain can be sheltered entirely.

Path A: Estate Freeze — Lock the Value, Shift the Growth

An estate freeze is a corporate reorganization — typically under section 85(1) or section 86 of the Income Tax Act — that accomplishes three things simultaneously:

1. Locks Paul's value at $900,000. Paul exchanges his common shares for new preferred shares with a fixed redemption value of $900,000. These preferred shares do not participate in future growth.
2. Issues new growth shares to the next generation. Paul's daughter (or a family trust she benefits from) subscribes for new common shares at nominal cost. All future business growth accrues to these new common shares.
3. Defers the capital gain. Under a section 85 rollover, Paul can elect a transfer price equal to his ACB ($100), deferring the entire $899,900 gain until the preferred shares are eventually redeemed, sold, or deemed disposed of at death.

The freeze does not eliminate the tax — it defers it. Paul still holds $900,000 of frozen value with a $100 ACB. When he dies, section 70(5) will trigger a deemed disposition of the preferred shares at their $900,000 redemption value, crystallizing the same $899,900 gain on his terminal return. But here is the key advantage: the $1.1M of growth (if the business goes from $900K to $2M) belongs to his daughter's common shares and never appears on Paul's terminal return, never enters his estate, and never faces NB probate.

Crystallizing the LCGE at the Time of Freeze

The sharper version of the freeze is a partial crystallization. Instead of electing a transfer price of $100 (full deferral), Paul elects a transfer price equal to the maximum LCGE available to him. This deliberately triggers a capital gain — but the gain is sheltered by the LCGE and pays zero tax. The new preferred shares then have an ACB equal to the crystallized amount rather than $100, permanently stepping up the cost base.

Why bother? Two reasons. First, it locks in today's LCGE amount and today's inclusion rates — if future budgets reduce the LCGE or change the tiered inclusion thresholds, Paul has already used the exemption. Second, it reduces the gain that will be taxable on Paul's terminal return. If the LCGE shelters a large portion of the $900,000, the remaining taxable gain at death shrinks substantially — potentially staying entirely within the 50% inclusion tier if the unsheltered gain is under $250,000.

Qualification Matters: Are the Shares QSBC?

The LCGE only applies to shares that meet the qualified small business corporation test under section 110.6 of the Income Tax Act. Three conditions must be met at the time of sale or freeze:

• Small business corporation test: at least 90% of the company's assets (by FMV) must be used in an active business carried on primarily in Canada at the time of disposition
• Holding period test: the shares must not have been owned by anyone other than Paul or a related person in the 24 months before disposition
• Asset use test: throughout the 24 months before disposition, more than 50% of the company's assets must have been used principally in an active business in Canada

The common trip-up: passive investment assets inside the corporation. If Paul's operating company has accumulated retained earnings and invested them in a GIC portfolio, marketable securities, or rental real estate, those passive assets can push the company past the 10% threshold and disqualify the shares. The fix — called "purification" — involves paying out excess passive assets as dividends or transferring them to a separate holding company before the freeze. Purification must be done carefully and ideally 24 months before the freeze to satisfy the asset-use test for the full lookback period.

Path B: Sell Now and Distribute — When Liquidity Wins

The estate freeze assumes someone is taking over the business. If Paul's daughter is ready, capable, and interested, the freeze is the natural path. But if she is not — or if Paul's son wants his half of the value in cash rather than in the form of an indirect interest in a company his sister runs — selling the business and distributing after-tax proceeds may be the cleaner answer.

What a sale looks like on Paul's numbers:

The after-tax proceeds, combined with Paul's $400,000 home (sheltered by the principal residence exemption under section 40(2)(b)) and $200,000 RRSP, give him a retirement base of approximately $1.25M–$1.4M in total assets. Deployed in a diversified portfolio generating 4–5% annually, that produces $50,000–$70,000 in annual income — supplemented by CPP and OAS starting at 65 or later.

The advantage of selling: Paul gets liquid, diversified assets that do not depend on a single operating company's continued success. The disadvantage: the tax is paid now rather than deferred, and the business — Paul's life's work — passes to an outside buyer rather than his daughter.

Share Deal vs Asset Deal: The Buyer's Preference and Paul's Tax

Most business buyers in New Brunswick prefer an asset deal — they buy the equipment, inventory, customer contracts, and goodwill rather than the corporate shares. This gives the buyer a stepped-up cost base on the acquired assets and avoids inheriting unknown liabilities. For Paul, an asset deal is worse: the company sells the assets, pays corporate-level tax on the recapture and capital gains, and Paul then extracts the after-tax proceeds as dividends — double taxation.

A share deal is almost always better for the seller. Paul sells his shares directly to the buyer, claims the LCGE on the gain (if QSBC-qualified), and pays personal capital gains tax at the tiered inclusion rates. No corporate-level tax. No double layer. The gap between asset-deal and share-deal after-tax proceeds on a $900,000 business can exceed $100,000 — a gap that usually gets negotiated as a price adjustment between buyer and seller. For more on this dynamic, see our business sale planning overview.

The RRSP: A Separate Problem Worth Solving Early

Paul's $200,000 RRSP is a ticking clock. If Paul has a spouse, the RRSP rolls over tax-deferred at death under section 146(8.8). If the spouse predeceases Paul or if they divorce, the RRSP becomes fully taxable on Paul's terminal return — stacked on top of the share deemed disposition. At New Brunswick's top combined rates, a $200,000 RRSP collapse generates approximately $95,000–$105,000 in income tax.

The fix is the same one that applies to every RRSP-heavy estate: draw it down strategically in retirement. Starting RRSP withdrawals at age 65 — pulling $25,000–$35,000 per year in lower-bracket years — converts the registered money into after-tax cash at 30–38% marginal rates instead of 50%+ on the terminal return. Over 15 years, the tax savings on a $200,000 RRSP drawdown strategy can exceed $25,000 compared to leaving it to collapse at death.

Freeze vs Sell: Decision Framework for New Brunswick Business Owners

The estate freeze and the outright sale are not the same decision dressed up differently — they serve fundamentally different goals. Here is how to choose:

In Paul's case, the split is clear: his daughter is in the business, but his son is not. A freeze works for the daughter's succession — but creates an equity problem. She gets a growing business; the son gets half of Paul's residual estate (the home, RRSP, and frozen preferred shares). One solution: Paul takes out a life insurance policy naming the son as beneficiary, sized to equalize the expected value of the daughter's business interest. The insurance proceeds pass tax-free and outside the estate, avoiding both NB probate and income tax.

The Equalization Problem: One Child Gets the Business, the Other Gets What?

This is where most New Brunswick business succession plans break down. Paul's estate without a freeze: $1.5M split equally = $750,000 each. With a freeze, the daughter gets the growing business and the son gets half of Paul's remaining assets — the frozen preferred shares (split or redeemed), the home, and the RRSP. If the business doubles in value after the freeze, the daughter's shares are worth $1.1M in growth while the son's inheritance is capped at his half of the frozen estate.

The standard fix is life insurance. A $500,000 term or permanent life policy on Paul, with the son as named beneficiary, provides tax-free cash outside the estate that does not pass through probate. The daughter gets the business. The son gets insurance proceeds plus his share of the frozen estate. Both children receive roughly equal value. The cost: insurance premiums on a 58-year-old male in New Brunswick, which vary based on health status, smoking history, and policy type. For a healthy non-smoker, a $500,000 term-20 policy runs approximately $200–$400 per month — a fraction of the equalization gap it solves.

The Bottom Line: $7,500 in Probate Is Not the Problem — the Shares Are

Paul's $1.5M New Brunswick estate faces $7,500 in probate — less than half a percent of gross value. The real cost is the capital gains exposure on $900,000 of operating company shares with a $100 ACB. Without the LCGE, the tax on those shares could reach $260,000–$290,000. With the LCGE (assuming QSBC qualification), a substantial portion of that gain is sheltered entirely. The estate freeze defers the remaining tax and shifts future growth out of Paul's estate — but it only works if someone is ready to catch the growth on the other side.

For Paul, the decision tree is: (1) confirm QSBC qualification and purify the corporation if needed, (2) get a formal business valuation, (3) execute the freeze with LCGE crystallization if the daughter is taking over, or (4) sell on a share-deal basis if she is not. The RRSP drawdown strategy runs in parallel regardless of which path the shares take.