Trust Planning & Family Investment Companies

WHAT IS A TRUST?

A Trust is established by the Settlor, who usually provides the assets held in the Trust. The trustees are the legal owners of the assets and use the trust deed to decide how the assets will be used. The beneficiaries will usually be family members: children, grandchildren, their spouses and other close family members. 

A trust is a way of managing assets (money, investments, land or buildings) for people. There are different types of trusts and they are taxed differently.

Trusts can be used for various reasons, including:

• To control and protect family assets
• When someone’s too young to handle their affairs
• When someone cannot handle their affairs because they’re incapacitated
• To pass on assets while you’re still alive
• To pass on assets when you die (a ‘will trust’)
• Under the rules of inheritance if someone dies without a will (in England and Wales)

WHAT IS A FIC?

A Family Investment Company is, as the name suggests, a private limited company. The company will frequently be initiated by a loan from the founder (who would be the Settlor if this was a Trust.) The shareholders are usually family members – the equivalent of the trustees in a Trust. 

The shares can be split into separate classes to provide different levels of control, income (from the dividends) and capital repayment. This gives similar flexibility to a Trust, but where a FIC has a further advantage is that, unlike the settlor in a Trust, the company founder can still benefit from the assets 

As a company it must have articles of association and submit accounts and confirmation statements to Companies House annually. FICs pay corporation tax, which is at a lower rather than the higher rate income tax and capital gains tax generally paid by Trusts.  

Although a FIC is more tax-efficient, it requires more input from solicitors and accountants, so you’ll need to be mindful of the set-up and operating costs. 

ADVISING ON AND SETTING UP A TRUST

Although Trusts may not be quite so tax-efficient as they once were, they continue to play an important role in family asset protection and estate planning. 

Our Trusts tax team specialises in providing bespoke advice on the use of family Trust structures to secure tax advantages, safeguard wealth and ensure your longer term estate planning objectives are met. Working closely with your legal and financial advisers we will: 

• Advise on the suitability and structure of your family Trust. 
• Consider the impact of all relevant taxes including Inheritance Tax, Capital Gains Tax, Income Tax and Land and Buildings Transaction Tax. 
• Ensure cohesion between the Trust advice and wider succession planning for your family and business interests. 
• Deal with all the associated tax compliance, from notifying HMRC to preparing the annual Trust tax returns. 
• Keep your Trust arrangements under review to give you the peace of mind that your family wealth is preserved for future generations. 

MAKING A FAMILY INVESTMENT COMPANY WORK FOR YOU

FICs are, for many, now the preferred choice for tax planning and assets protection. Many of our clients are drawn to FICs as a means of passing on family wealth whilst retaining an element of control and taking advantage of favourable Corporation Tax rates. 

Our team of tax specialists regularly advise on: 

• The structuring and financing of FICs. 

• Tax efficient distributions from the FIC and managing the timing of profit extraction to take advantage of lower Income Tax bands and allowances. 
• The Inheritance Tax benefits of using a FIC structure and the potential interaction with Trust tax planning. 
• All associated tax compliance from initial set up to annual reporting obligations. 

We will work alongside you and your family to ensure your FIC protects the interests of all shareholders and meets your longer-term succession planning objectives.