Combining a FIC and a Trust structure

Background

Paul Edwards, a successful entrepreneur with substantial property and equity wealth, wanted to:

  1. Transfer wealth tax-efficiently to his children Jessica and Oliver.
  2. Retain strategic control while involving them in family wealth management.
  3. Protect and grow family wealth tax-efficiently.
  4. Reduce IHT exposure and provide long-term family security.

Because trust funding limits could trigger an immediate IHT charge, Paul chose a FIC combined with a family trust.

Solution

To ensure an effective balance between control, tax efficiency, and succession planning, the company is structured with different classes of shares as follows:

Share class Holder Rights and role
A shares Paul (father) 20% voting rights, dividend entitlement, retains strategic control
B shares Jessica (daughter) 20% voting rights, dividend entitlement, participates in investment decisions
C shares Oliver (son) 20% voting rights, dividend entitlement, participates in investment decisions
D shares Family Trust 40% voting rights, dividend entitlement, passive beneficiaries

Paul controls 60% of the voting rights through his A shares and the family trust, retaining shareholder control. Jessica and Oliver each hold 20% voting rights and can:

  1. Participate in decisions.
  2. Receive dividends.

The trust’s D shares allow dividends to benefit future and wider family members.

Outcome

As chairman and majority shareholder, Paul guides strategy while Jessica and Oliver gain board experience and prepare for leadership.
Only Paul’s 20% personal holding remains in his estate and may attract a minority discount. Growth on the other 80% falls outside his estate for IHT.

This illustrates one possible FIC structure; tailored advice is essential.