FIC vs family trust: which structure suits your family?
Both vehicles pass wealth down the generations, but they behave very differently on control, taxation and cost. This guide sets the two side by side so you can see where each one earns its place.
What is the difference between a FIC and a family trust?
A Family Investment Company is a private limited company whose shareholders are family members. The founders subscribe cash or assets, and the company invests. A discretionary trust is not a company at all — it is a relationship in which trustees hold assets for beneficiaries and decide, at their discretion, who benefits and when.
That single structural difference drives almost everything else: a company gives you contractual certainty and retained control, while a trust gives you flexibility and distance from the assets.
Side-by-side comparison
| Factor | Family Investment Company | Discretionary trust |
|---|---|---|
| Control | Founders keep control through voting shares and the articles, even after gifting economic value away. | Control passes to trustees, who owe duties to beneficiaries and must act at their discretion. |
| Entry charge | No lifetime inheritance tax entry charge on subscribing cash for shares. | Transfers above the nil-rate band can attract a 20% lifetime inheritance tax charge. |
| Ongoing charges | No periodic or exit charges; company profits bear corporation tax. | Relevant property trusts face ten-year periodic charges and exit charges of up to 6%. |
| Tax on investment income | Corporation tax, usually at the 25% main rate for investment companies; most UK and many overseas dividends received are exempt. | Discretionary trusts pay 45% on most income and 39.35% on dividends, with only a small allowance at lower rates. |
| Getting money out | Dividends to shareholders, or tax-free repayment of money founders lent in. Dividends to a parent's minor children are taxed on the parent. | Distributions at trustee discretion, with tax credits and exit charges to manage. |
| Privacy | Accounts and shareholder information are filed publicly at Companies House. | Far more private, though registrable with HMRC's Trust Registration Service. |
| Best suited to | Families with investable capital who want retained control and long-term compounding. | Families prioritising asset protection, vulnerable beneficiaries or full flexibility. |
When is a FIC better than a trust?
- You want to hand down future growth without handing over the decisions today.
- You are funding with cash or listed investments, so there is no entry charge to plan around.
- You intend to retain and reinvest profits, where corporation tax is far kinder than trust rates.
- You value a familiar, well-understood legal wrapper that banks and advisers deal with daily.
When is a trust still the better choice?
- Beneficiaries are young, vulnerable, or their circumstances are genuinely unpredictable.
- Asset protection from divorce or creditor claims is the leading concern.
- Privacy matters more than tax efficiency, since company filings are public.
- You want to remove assets from your estate now and accept losing control over them.
Can you use a FIC and a trust together?
Many families do not choose. A common design has a trust hold a class of shares in the Family Investment Company, so the company does the investing and compounding while the trust handles discretion over who ultimately benefits. That blend needs careful drafting and specialist tax input, but it can capture the strengths of both.
Frequently asked questions
Neither is better in every case. A FIC funded by cash subscription avoids the 20% lifetime entry charge and the ten-year periodic charges that apply to most trusts, while a trust can offer stronger asset protection and privacy. The right answer depends on your family's priorities.
Yes. Founders usually retain voting shares and act as directors, so they decide on investments and dividends even after giving the economic value of growth shares to family members.
Yes. A FIC is a company, so its accounts and shareholders are filed at Companies House. Some families use an unlimited company, which does not file accounts, but its shareholders have unlimited liability for its debts.
Yes. A trust can hold growth shares in a FIC, which is useful when the beneficiaries are minors or when extra protection is wanted.
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