For high-net-worth families, safeguarding wealth for the next generation is rarely a question of if — it is a matter of how. The way assets are structured can significantly affect how effectively they are protected, grown and passed on.
Long-term planning is not only about tax efficiency, but also about retaining control, preserving family values, and ensuring a smooth transfer of wealth across generations.
Two increasingly popular structures in legacy planning are the Family Investment Company (FIC) and the Trust. Both can play an important role in intergenerational wealth strategies, but they operate in very different ways. Each has its own implications for taxation, governance, cost and succession planning.
In this article, we explore the key differences between an investment company vs trust, helping you understand how each structure works, and when one might be preferable to the other.
What is a Family Investment Company?
A Family Investment Company (FIC) is a private limited company set up specifically to hold and manage family wealth. It is often used as a flexible, modern alternative to a trust, particularly by families seeking to retain control over assets while planning for future succession.
In a typical structure, parents or founders establish the company and act as directors, retaining control over how assets are managed. Children or other family members may be introduced as shareholders, with shares structured to either carry or exclude voting rights. This means founders can limit decision-making powers while still passing value down the generations.
FICs are commonly used to hold investments such as property portfolios, cash, or listed securities. Returns from these assets remain within the company until distributed, usually in the form of dividends, enabling a level of control over how and when beneficiaries access funds.
A Family Investment Company can allow for long-term strategic planning. Unlike trusts, which are subject to certain legislative time limits and tax regimes, FICs are corporate vehicles with more open-ended flexibility.
They are often used alongside tailored wealth management services, particularly where a professional adviser can help guide long-term investment decisions, support tax-efficient structuring, and ensure that family values and priorities are reflected in the governance of the company.
What is a trust?
A trust is a legal arrangement in which a person or group (the trustee(s)) holds and manages assets for the benefit of others, known as the beneficiaries.
It is a well-established estate planning tool, often used to control the flow of wealth across generations. When set up correctly, a trust can offer tax planning advantages and a layer of protection for family assets.
There are several types of trust structures, each offering varying degrees of control and flexibility. For example:
- A discretionary trust gives trustees full discretion over how and when income or capital is distributed among beneficiaries.
- A life interest trust provides one individual (often a spouse or partner) with the right to income for life, while preserving capital for future beneficiaries.
- A bare trust gives the beneficiary full entitlement to the assets, but the trustee manages them until the beneficiary reaches a specified age.
A key feature of trusts is their ability to offer flexible distributions, which can be tailored over time to suit changing family needs or circumstances. They can also include protective elements, such as ring-fencing assets from creditors, divorce proceedings or spendthrift behaviour.
Setting up a trust requires careful thought around the choice of trustees and the drafting of the trust deed, which will govern how the assets are managed. It is important to be aware that trustees carry legal responsibilities and must always act in the best interests of the beneficiaries.
Trusts are often used alongside broader financial planning for families, helping to balance control with flexibility and to support the smooth, tax-efficient transfer of wealth through generations.
Family Investment Company vs trust: Key feature comparison
While both Family Investment Companies (FICs) and trusts offer useful frameworks for intergenerational planning, they differ significantly across key dimensions. Choosing the right structure depends on your family’s financial goals, tax position, level of desired control and long-term succession plans.
Here is how each structure compares:
A. Tax Efficiency
Trusts
Set up correctly, trusts can often be effective for inheritance tax (IHT) mitigation, particularly when assets are placed into trust early enough to fall outside the estate. However, they can come with potential tax burdens:
- IHT charges may apply when assets are transferred into the trust and at ten-year anniversaries (the “periodic charge”).
- Income within the trust is often taxed at the higher or additional rates, with limited allowances for discretionary trusts.
- Beneficiaries may also be taxed when they receive distributions.
FICs
FICs are generally taxed as companies. Key considerations include:
- Corporation Tax is payable on gains and income (currently 19–25% depending on profits), often lower than personal income tax rates.
- Retained profits can be reinvested efficiently within the company.
However, extracting income — for example, via dividends — may trigger personal tax liabilities for shareholders.
Given the complexity of tax treatment in both structures, tailored financial planning for families is essential. Families often benefit from holistic advice that balances tax efficiency with long-term goals.
B. Control and Governance
FICs
FICs offer a highly controlled structure. Parents often act as directors, retaining day-to-day decision-making powers. Different share classes can be used to separate:
- Voting rights (typically retained by the founder generation)
- Income or capital rights (allocated to children or future generations)
- This makes it easier to manage wealth without giving up control too early.
Trusts
In contrast, trusts operate under the authority of trustees, who must act in accordance with the trust deed and their fiduciary duties. While this adds a layer of legal protection, it also means the person who creates the trust — known as the settlor — cannot retain full control once the trust is established.
This difference has major implications for generational planning. Some families prefer the oversight and flexibility of an FIC, while others value the independence and legal safeguards of a trust.
C. Succession Planning
Trusts
Trusts are often favoured for succession planning due to their ability to gradually transfer wealth while protecting beneficiaries who are:
- Too young to manage assets
- Financially inexperienced
- Vulnerable due to health or personal circumstances
Assets can be passed on while still ensuring they are used appropriately.
FICs
An FIC can also facilitate wealth transfer, particularly by introducing children as shareholders over time. Importantly, the founding generation can retain control through directorships and voting rights while bringing younger family members into the structure gradually.
Both structures require careful alignment with the family’s broader ambitions. Professional, independent guidance is crucial to ensure the chosen model supports your values, priorities and long-term legacy.
D. Privacy and Regulation
FICs
As limited companies, FICs are subject to public disclosure rules. Details of directors and shareholders are recorded at Companies House, which may not suit families who prefer discretion. Annual filings and confirmation statements are also required.
Trusts
While traditionally more private, trusts have become increasingly transparent under the UK’s Trust Registration Service (TRS). Most express trusts must now be registered with HMRC — even if no tax is due — reducing the privacy advantage.
The regulatory landscape is evolving, so understanding the implications of visibility is important when choosing a structure.
E. Cost and Complexity
FICs
Setting up an FIC involves:
- Incorporating the company
- Drafting bespoke articles of association
- Creating appropriate share classes
- Ongoing accounting, tax and compliance obligations
While these may not be prohibitive for high-net-worth families, they do require commitment and ongoing professional support.
Trusts
Creating a trust typically involves legal fees for the drafting of a trust deed and possibly ongoing costs if appointing professional trustees. The administrative burden may be lighter than for a company, but trustees must still meet legal responsibilities and keep records.
When comparing a Family Investment Company vs trust, it is not a DIY decision. Specialist legal and financial advice is vital to ensure the structure is correctly set up, tax-efficient, and aligned to your intentions.
Choosing the right structure — or combining both
Whether a Family Investment Company or a Trust is more appropriate will depend on your family’s goals, tax position and appetite for involvement.
A Family Investment Company may be preferable when:
- Parents wish to retain control while gradually passing on wealth
- The family is comfortable with corporate structures and responsibilities
- The aim is to grow and manage investments within a long-term, tax-efficient wrapper
- The family owns a business and wants to ring-fence certain assets or create continuity
A Trust, on the other hand, may be more suitable when:
- Protecting vulnerable or younger family members is a priority
- There is a need to remove assets from the estate for Inheritance Tax purposes
- A more private, protective legal arrangement is desired
- Control is less important than flexibility and safeguarding
In practice, it is not always a case of either/or. For some families, it makes sense to combine the two — for example, by placing shares in a Family Investment Company into a discretionary trust. This can provide the control of an FIC with the asset protection and IHT benefits of a trust, offering a solution for multi-generational planning.
Whatever your preference, a joined-up approach to financial planning for families is essential to ensure your structure supports your wider legacy goals.
Legacy planning is personal — get help choosing the structure that fits from the experts at Partridge Muir & Warren
There is no one-size-fits-all solution when it comes to legacy planning. Both Family Investment Companies and Trusts can offer distinct advantages — and potential limitations — depending on your family’s circumstances and long-term objectives.
The right approach for you will depend on:
- The nature and scale of your assets
- Your family dynamics, including the ages and needs of potential beneficiaries
- Your time horizon for transferring wealth
- Whether you prioritise control, protection, privacy, or tax efficiency
What matters most is ensuring that your chosen structure is aligned with your wider goals — from protecting younger generations to supporting philanthropic aims or preserving wealth across decades.
At PMW, our experienced team of chartered financial planners works closely with legal and tax professionals to design legacy strategies that reflect your values, your goals, and your family’s evolving needs.
Speak to us today for tailored advice on creating a structure that supports long-term peace of mind — for you and the generations to come.
Kindly note this article is not intended as personalised financial advice, and that individual circumstances will vary. For any legacy planning decisions, we recommend seeking tailored, professional guidance from a regulated financial planner.