Family Investment Companies: All you need to know about the modern alternative to inheritance

If you’re currently in the process of setting up a trust, or you’re considering how to best hand out your inheritance when the time comes, then you might want to give the new kids on the block a go. Family investment companies, a modern alternative to trusts, can be hugely beneficial when it comes to inheritance – if managed in the right way. Read on the find out more.

What is a family investment company?

A family investment company is, in its most basic form, a created company that holds the wealth of a specific family – used as an alternative to personal or individual trusts. In the right set of circumstances, this can have plenty of benefits as a viable alternative to more traditional inheritance trusts. Both in terms of practicality, and in terms of financial differences that apply to a company as opposed to an individual.

How do family investment companies work?

You can look at a family investment company as a sort of financial family tree. Typically, multiple generations of the same family are included as shareholders within this company. The family members that introduce the capital are generally appointed as or considered the directors of that company. Once an FIC is fully set up, assets – including property, cash and even investments – can be transferred to the company, where they can remain until they are ready to be passed on as an inheritance to the next member of the family.

Family investment companies vs. trusts – which is better?

The critical difference between a trust and a family investment company is how they are classified legally and financially. Whereas a trustee is an individual, and as such is required to pay as much as 45% tax, companies are commercial – hitting a far lower 19/17% rate on assets for taxation purposes. That figure alone suggests why FICs are an excellent choice under certain circumstances. For inheritance and estate planning, trusts can quickly be depleted by the many costs, taxes and fees involved in the process. By contrast, FICs have those who will inherit assets as shareholders within a private company, saving those additional costs and protecting any assets far more effectively in the process.

Why family investment companies are the best fit for modern families

The financial benefits of FICs alone make them an excellent fit for many families. But the added protection of wealth in the event of a divorce or separation is another big reason why family investment companies are the ideal choice for the average modern family. While this particular option won’t be suited to absolutely everyone, it provides a viable vehicle to reduce tax and ensure the maintenance of assets and wealth for the family as a whole.

How can I start my own family investment company?

If you’re interested in starting your own family investment company, the first step is to seek financial insight and support. Using the professionals to set up an FIC is the best way to ensure you’re completing all the legal and tax-related steps required to make your company legitimate, viable and sensical. By consulting with the experts, you can provide a successful financial future for your family – without the high levels of taxes currently charged on all inheritance and assets through traditional means.

Mitch Young, Director & Head of Tax

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