The benefits of a Family Investment Company
By International Adviser, 30 Jul 18
People wanting to protect and maintain control of family wealth are increasingly turning to family investment companies. Ravi Francis, senior associate solicitor at Irwin Mitchell Private Wealth outlines the benefits and drawbacks of using such a structure.
Bespoke: Every family’s circumstances are unique. FICs allow the governance and distribution of investment wealth to be tailored to particular family needs. FICs can hold almost any kind of asset and use different share classes and constitutional rules to divide benefit and control as appropriate.
Tax efficiency: If done correctly, there will be no IHT charge on a transfer of assets to an FIC. Capital gains tax may be payable if certain assets are transferred. FIC profits are taxed at corporate tax rates, which are attractive compared to personal and trust tax rates. Where income is surplus to the shareholders’ requirements, it can be “rolled up” within the FIC.
Limited liability: Shareholder liability is usually limited to the paying up of their shares, but shareholders may retain substantial control over the company.
Retention of control: Unlike with trusts, a founder can (if they wish) influence investment policy and select investment advisers. A suitably qualified professional can draft the constitutional documents to work from a wealth planning perspective.
Asset protection: If non-voting shares are gifted to children or other family members, restrictions can be included in the articles to prevent them being transferred. This could be particularly important to prevent shares being transferred to a spouse on divorce.
Click through to the next slide to read about the key risks of an FIC.
Tags: Irwin Mitchell
