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Trusts & Family Investment Company
Planning
Advanced structures that combine tax efficiency with family control, asset protection,
and flexible wealth transfer mechanisms.
What are trusts & family investment companies?
Trusts and Family Investment Companies (FICs) are established legal and corporate structures that can hold and manage assets for the benefit of family members and, when set up correctly and reviewed regularly, may offer significant tax advantages and asset protection.
Trusts are traditional legal arrangements where trustees hold assets for beneficiaries according to the trust deed. They offer strong asset protection, flexibility in distribution, and immediate IHT benefits but can be complex to administer.
Family Investment Companies are modern corporate structures where parents retain control through special shares while children hold growth shares. They provide tax efficiency, transparency, and easier administration than trusts.
The choice between trusts and FICs depends on your specific circumstances, control preferences, and asset types. Our tax specialists analyse your situation and, in coordination with the appropriately regulated professionals, help you identify the optimal structure — the incorporation and formation work itself is delivered by a firm subject to the relevant AML supervision.
>40%
of HNWI in the UK use trusts or Family Investment Companies within their estate planning
OUR EXPERTISE
Key trust & FIC structures to reduce IHT liabilities
Discretionary trusts offer maximum flexibility, allowing trustees to make distribution decisions based on changing family circumstances. Ideal for families seeking control over when and how beneficiaries receive assets.
- Trustees have full discretion over distributions
- Protects assets from beneficiary creditors and divorce
- Flexible—can respond to changing family needs
- 10-year periodic charges and exit charges apply
- IHT Benefit: Assets are removed from the estate once settled and survive seven years. Periodic and exit charges apply but are often lower than the 40% IHT rate.
Best for: Families with vulnerable beneficiaries, complex family structures, or those wanting maximum flexibility in distributions.
Watch: Should I use a discretionary trust or an Employee Benefit trust to hold my company shares?
A bare trust is the simplest form of trust where assets are held in the trustee’s name but the beneficiary has an immediate and absolute right to both the capital and income. The beneficiary is treated as the beneficial owner for tax purposes.
- Beneficiary has absolute entitlement to assets
- Trustee acts as nominee only—no discretion
- Income and gains taxed on beneficiary, not trustee
- Simple to administer with minimal compliance
- Often used for children until they reach majority
- IHT Benefit: Treated as a gift for IHT purposes. If the settlor survives seven years, the value falls outside the estate.
Best for: Simple gifting arrangements, holding assets for children, or when you want straightforward administration without ongoing trustee discretion.
- Beneficiary must qualify as a vulnerable person under HMRC rules
- Trustees have discretion over how and when funds are used
- Assets are managed to support the beneficiary’s care, wellbeing, and quality of life
- Can help protect entitlement to certain state benefits
- Income and gains may qualify for special tax treatment (similar to personal rates)
- Often used by families to provide long-term financial security and oversight
- IHT Benefit: Can be structured to minimise inheritance tax, particularly when set up during lifetime or via a will
Best for: Families wanting to provide ongoing financial support for a disabled or vulnerable loved one while maintaining benefit eligibility and ensuring funds are managed responsibly over time.
Read: How Disabled Trusts Work and the Key Benefits for UK Families
IIP trusts grant beneficiaries the right to trust income while capital remains protected. Commonly used for providing income to surviving spouses while preserving capital for children.
- Life tenant receives all trust income
- Capital protected for remaindermen (often children)
- No 10-year periodic charges
- Provides income security with capital protection
- Common in will planning for blended families
- IHT Benefit: Can freeze the taxable value at the point of creation and help control how assets pass between generations.
Best for: Second marriages, providing for surviving spouses while protecting children’s inheritance, or income-focused estate planning.
- Immediate reduction in estate value (the “discount”)
- Retain access to regular income for life
- Growth on gifted assets falls outside estate
- Commonly used with investment bonds
- Actuarial calculation determines discount percentage
- IHT Benefit: A portion of the gift (the “discount”) is immediately outside the estate. The remainder is potentially exempt after seven years.
Best for: Those wanting to make substantial gifts while retaining regular income, particularly with investment bonds or pension lump sums.
Loan trusts allow you to transfer assets to trust while retaining access to the original capital via a loan. All future growth sits outside your estate, providing immediate IHT benefits without losing access to funds.
- Retain access to original capital via interest-free loan
- No seven-year wait for growth benefits
- Flexibility to repay loan or waive it over time
- Ideal for investment portfolios and liquid assets
- No immediate gift—loan remains in your estate
- IHT Benefit: Growth on the loaned funds falls outside the estate from inception.
Best for: Those wanting immediate IHT benefits on growth without completely giving up access to capital, particularly for investment portfolios.
A gift and loan trust combines elements of both structures – you make an initial gift into trust and then loan additional capital. This maximizes IHT efficiency while maintaining access to loaned funds.
- Gift element starts seven-year IHT clock immediately
- Loan element provides immediate growth exemption
- Access to loaned capital while making a meaningful gift
- Flexible—can adjust loan repayments or waive over time
- Balances IHT planning with capital access
- IHT Benefit: Gifted portion becomes exempt after seven years; growth on both elements sits outside the estate.
Best for: Those wanting to maximize IHT benefits through gifting while retaining some capital access for flexibility and security.
Offshore trusts established by non-UK domiciled individuals before becoming UK domiciled can hold “excluded property” that remains outside the scope of UK IHT. These are highly specialized structures requiring expert advice.
- Only available to non-UK domiciled individuals
- Must be established before becoming UK deemed domiciled
- Assets within trust remain outside UK IHT scope
- Can hold foreign assets or investments
- Complex compliance and reporting requirements
- Requires specialist cross-border tax advice
- IHT Benefit: Assets settled into the trust before becoming UK domiciled are excluded from UK IHT.
Best for: Non-UK domiciled individuals planning to become UK resident who want to protect foreign assets from future UK IHT exposure.
FICs use company share structures to achieve IHT efficiency while providing founders with control and transparency. Parents hold voting shares, children hold growth shares, delivering tax benefits with family governance.
- Parents retain control via alphabet/voting shares
- Children/beneficiaries receive growth shares (immediate IHT gift)
- Corporate tax rates (19-25%) vs income tax (up to 45%)
- Clear governance and decision-making structure
- Easier to understand than traditional trusts
- Flexible dividend policy to control income distributions
- IHT Benefit: Future growth in company value passes to the next generation outside the parents’ estate. Shares can also qualify for business relief in some cases.
Best for: Property portfolios, investment portfolios, and families wanting corporate structure, transparency, and retained control.
Watch: Why use a Family investment company to reduce inheritance tax
A hybrid FIC combines the corporate structure of an FIC with trust elements, where children’s growth shares are held within a discretionary trust. This provides the control and efficiency of an FIC with the flexibility and protection of a trust.
- Growth shares held in discretionary trust
- Parents maintain voting control through direct shareholding
- Trust provides creditor protection for beneficiaries
- Flexibility to adjust beneficiaries over time
- Combines corporate tax efficiency with trust protection
- Useful for complex family dynamics or young beneficiaries
- IHT Benefit: Retains the IHT advantages of both structures while offering flexibility for future changes in ownership or governance.
Best for: Families wanting FIC tax efficiency with trust-level protection and flexibility, especially where beneficiaries are young or circumstances may change.
Watch: Why use an employee benefit trust with my family investment company?
The most sophisticated approach combines multiple structures—trusts, FICs, gifting, and insurance—to address different assets and objectives. Each element serves a specific purpose within a coordinated overall strategy.
- Trusts for liquid assets and immediate protection
- FIC for property and investment portfolios
- Regular gifts to use annual exemptions
- Life insurance in trust to cover remaining IHT
- Pensions optimized for IHT-free death benefits
- Coordinated approach maximizes all available reliefs
- IHT Benefit: Each component manages a different aspect of the estate—gifts, growth, liquidity—creating a complete IHT mitigation framework.
Best for: High-value, complex estates requiring a tailored, multi-faceted approach to minimize IHT while maintaining flexibility and control.
CHOOSING THE RIGHT STRUCTURE
Trusts vs FICs: How to choose
Choosing between trusts and FICs depends on your priorities around control, transparency, asset types, and family
dynamics. Here’s how they compare:
Maximum flexibility in distributions needed
Strong asset protection is priority
- Immediate IHT benefits required
Vulnerable beneficiaries involved
Control and transparency preferred
Property or investment portfolios involved
Lower ongoing compliance costs desired
Educate next generation in wealth management
WHY CHOOSE BLUEBOND
The Bluebond difference
Legal Excellence
FIC incorporation – we design the structure and instruct another firm to incorporate
Tax Strategy
Structure selection based on IHT, CGT, and income tax modeling—ensuring the chosen vehicle delivers optimal tax efficiency for your asset types.
Wealth Planning
Financial structuring, liquidity planning, and distribution strategies that support your lifestyle while maximizing wealth transfer efficiency.
Implement the optimal structure for your
family
Discover whether a trust or FIC is right for your family’s wealth transfer objectives.
