Trust vs Family Investment Company (FIC)
Which is better for family wealth?
When you’re choosing the best structure for protecting and growing family wealth, the debate usually lands on Trust vs Family Investment Company (FIC).
And honestly, it is a big decision.
Both can help with estate planning, asset protection, and long-term wealth strategy. But they work in very different ways, especially around control, tax, admin, and how money gets passed down.
This guide breaks it all down, in plain English, so you can decide what fits your family best.
Trusts vs Family Investment Companies: explained
What is a trust?
A trust is a legal arrangement where a settlor transfers assets to trustees, who look after them for the benefit of beneficiaries.
Trusts are often used to:
protect family assets (including from divorce and creditors, depending on the facts)
look after vulnerable beneficiaries
control when and how people receive wealth
support inheritance tax (IHT) planning (with proper advice and the right type of trust)
Trusts have different “flavours” (discretionary, interest-in-possession, bare trusts etc.) and the tax treatment can be very different depending on which one you use.
What is a Family Investment Company (FIC)?
A Family Investment Company is usually a private limited company set up to hold and manage family investments (shares, funds, property via corporate structure, cash portfolios, etc.).
The big appeal is control. You can build in different share classes (for example, voting shares vs growth shares) so the founders can keep steering the ship while gradually moving value to the next generation.
A FIC comes with company compliance (accounts, corporation tax returns, Companies House filings), because it’s a company.
Comparison table: Trust vs FIC
Trust Family Investment Company (FIC)
Who controls it? Trustees control the assets (they must act for beneficiaries) Directors/shareholders control it (often the founders keep voting control)
Best for Protecting assets, vulnerable beneficiaries, controlled distributions Long-term investment growth, family governance, keeping hands-on control
Income tax Often higher trust rates (depends on trust type) Corporation tax on company profits; dividends taxed on shareholders when paid out
Capital gains Trustees have their own CGT rules and rates Company pays corporation tax on gains (not CGT)
Inheritance tax Can trigger entry/periodic/exit charges depending on structure Often used to “freeze” founder value and shift growth; IHT depends on how shares/loans are structured and transferred
Asset protection Strong, because beneficiaries don’t own the assets outright Strong if share rights/restrictions are drafted properly
Privacy Not publicly listed, but many trusts must be registered for reporting Companies House filings are public (unlimited companies may disclose less)
Admin & running costs Trustee admin, tax returns, trust accounts, advice costs Annual accounts, CT returns, Companies House filings, governance
Control: who holds the steering wheel?
Trust control
With a trust, trustees are in charge, and they have legal duties to act in beneficiaries’ interests. The settlor can guide things via the trust deed and a letter of wishes, but they typically cannot keep full personal control without creating tax and legal problems.
FIC control
With a FIC, control is usually much more flexible. Founders can:
keep voting shares
give growth shares to adult children
use different share classes (including preference shares) to shape who gets income vs future value
This is why FICs often feel more “hands on” for founders.
Tax: the bit everyone cares about
Trust taxation (UK)
Trust tax depends on the type of trust, but commonly:
income can be taxed at higher trust rates
trustees have their own capital gains rules
certain trusts can face inheritance tax charges when assets go in, at 10-year anniversaries, and when assets leave the trust
This doesn’t automatically make trusts “bad”. It just means you need a plan that matches the trust type to the family goal.
FIC taxation (UK)
FICs pay corporation tax on profits, and then (if profits are distributed) shareholders can pay tax on dividends.
FICs can be efficient for long-term accumulation because:
profits can be reinvested inside the company
company costs can be deductible where they’re wholly and exclusively for the business
founders can manage extraction strategy over time (salary/dividends/loan repayment depending on structure)
“But what about Business Relief (BPR) on FIC shares?”
This is where people get caught out online.
A typical FIC that mainly holds investments is usually treated as an investment business, which generally does not qualify for Business Relief.
If you’ve got a genuine trading business (or a trading group position), that can be a different conversation, but a standard “investment-holding FIC” generally won’t get that relief.
Asset protection and privacy
Asset protection
Trusts can be very strong for protection because beneficiaries don’t own the assets outright.
FICs can also be strong if the constitution is drafted well (share restrictions, different classes, family governance rules).
Privacy
Trusts aren’t publicly listed, but many must be registered for reporting.
FICs file at Companies House, so key info is public.
So… which one is “better”?
A trust may suit you if:
you want to protect a beneficiary (young, vulnerable, or just not ready)
you want a structure that controls when people receive money
you want strong separation between the asset and the beneficiary’s personal life
A FIC may suit you if:
you want to keep control while building a multi-generational investment pot
your plan is long-term reinvestment (rather than regular personal spending)
you want a governance structure your family can actually run like a business
And yes, plenty of families use both together, but it needs careful design.
Common mistakes we see (so you don’t make them)
assuming Business Relief applies to a typical investment-holding FIC
setting up a trust without planning for 10-year and exit charges
treating a FIC like a “tax-free piggy bank” and forgetting shareholder tax exists
not planning for UK residence changes if you’re UK–UAE and might return to the UK
Conclusion
Both Trusts and Family Investment Companies can be brilliant. The “right” choice depends on:
how much control you want to keep
whether your priority is protection vs investment growth
how and when the next generation will receive value
your UK tax residence position (especially for UAE-based families)
If you want, we can map this properly with you (and keep it practical, not theoretical), then build the structure around your real-world goals.
Book a consultation with Boffin and we’ll help you choose a structure that protects what you’ve built and keeps more of it in the family.
