FIC vs family trust: which structure suits your family?

Both vehicles pass wealth down the generations, but they behave very differently on control, taxation and cost. This guide sets the two side by side so you can see where each one earns its place.

The essential difference

A Family Investment Company is a private limited company whose shareholders are family members. The founders subscribe cash or assets, and the company invests. A discretionary trust is not a company at all — it is a relationship in which trustees hold assets for beneficiaries and decide, at their discretion, who benefits and when.

That single structural difference drives almost everything else: a company gives you contractual certainty and retained control, while a trust gives you flexibility and distance from the assets.

Side-by-side comparison

Factor	Family Investment Company	Discretionary trust
Control	Founders keep control through voting shares and the articles, even after gifting economic value away.	Control passes to trustees, who owe duties to beneficiaries and must act at their discretion.
Entry charge	No lifetime inheritance tax entry charge on subscribing cash for shares.	Transfers above the nil-rate band can attract a 20% lifetime inheritance tax charge.
Ongoing charges	No periodic or exit charges; company profits bear corporation tax.	Relevant property trusts face ten-year periodic charges and exit charges of up to 6%.
Tax on investment income	Corporation tax rates apply; most UK and many overseas dividends received are exempt.	Trust rates on income are high, currently 45% on non-dividend income above the standard band.
Getting money out	Dividends to shareholders, salaries where justified, or repayment of director loans tax-free.	Distributions at trustee discretion, with tax credits and exit charges to manage.
Privacy	Accounts and shareholder information are filed publicly at Companies House.	Far more private, though registrable with HMRC's Trust Registration Service.
Best suited to	Families with investable capital who want retained control and long-term compounding.	Families prioritising asset protection, vulnerable beneficiaries or full flexibility.

Where a FIC usually wins

You want to hand down future growth without handing over the decisions today.
You are funding with cash or listed investments, so there is no entry charge to plan around.
You intend to retain and reinvest profits, where corporation tax is far kinder than trust rates.
You value a familiar, well-understood legal wrapper that banks and advisers deal with daily.

Where a trust still earns its place

Beneficiaries are young, vulnerable, or their circumstances are genuinely unpredictable.
Asset protection from divorce or creditor claims is the leading concern.
Privacy matters more than tax efficiency, since company filings are public.
You want to remove assets from your estate now and accept losing control over them.

Using both together

Many families do not choose. A common design has a trust hold a class of shares in the Family Investment Company, so the company does the investing and compounding while the trust handles discretion over who ultimately benefits. That blend needs careful drafting and specialist tax input, but it can capture the strengths of both.