How can a family investment company help you pass on wealth to your children?

For families looking for a secure and tax-efficient way to manage and pass on wealth to their next generation, a family investment company (FIC) may be a suitable alternative to a trust or a simple outright gift to children.

The first transfer of funds to a FIC is not subject to an IHT charge unlike a trust, meaning that the first transfer is not limited to £325,000 (or £650,00 for a married couple).

A FIC is a private company whose shareholders are typically family members and/or family trusts. The use of a company means that the structure is flexible and can provide a tailored approach, with different rights attributed to shares issued to parents and children, as appropriate. The articles of association and shareholders’ agreement can be prepared to meet the precise needs of the family.

Benefits of a FIC

• Preservation of wealth: growth of the company would remain with family shareholders (or family trusts), entitling them to income or capital from the FIC.
•  Flexibility: there is flexibility in the types of assets that can be held and incorporated into the setup/structure of the company.
•  Control: donor(s) can still receive benefits and keep control over assets while passing wealth down to future generations.
•  Tax advantages: alongside the inheritance tax benefits, a FIC’s corporation tax is low in comparison to trust rates.

If you have any questions or wish to discuss whether a family investment company is the right approach for you, please get in touch – we would be delighted to help.

Our Legal 500-rated wills, trusts & probate team has the expertise to help you plan for the future and guide you through any difficult challenges that may arise, including those relating to family investment companies.