February 2, 2026
Private Client
Freya Grant
When structuring a Family Investment Company (FIC), a key question is how shares intended for the next generation should be held. The two most common options are outright ownership by individuals or ownership through a trust. Each has very different implications for control, flexibility, asset protection and tax.
One of the primary advantages of using a trust is its ability to endure over the long term. A trust can last for up to 125 years and can include not only existing family members but also future, unborn descendants. This allows founders to plan beyond the immediate generation and retain flexibility over when and how beneficiaries benefit.
Discretionary trusts, in particular, allow trustees to decide the timing and extent of distributions, which can be valuable where family circumstances change over time.
By contrast, once shares are issued outright to individuals, flexibility is lost. While shares issued to minors are held on bare trust until they reach adulthood, the founders cannot, at the outset, cater for future generations. Once an individual owns shares outright, there is limited scope to influence how those shares are held or used.
Trust ownership can also provide a meaningful layer of asset protection. In a discretionary trust, no beneficiary has an absolute entitlement to income or capital. As a result, the value of the trust assets does not form part of a beneficiary’s estate for inheritance tax purposes and is generally more insulated from third-party claims.
This can be particularly relevant in the context of divorce or bankruptcy. Shares owned outright by family members fall within their personal estates and are exposed to such risks. Although shares held for minors are protected while they remain under 18, once they reach adulthood they become legally entitled to the shares and can exercise all associated rights — something some families consider too early.
That said, careful drafting of the FIC’s governing documents, such as the articles of association and shareholders’ agreement, can introduce safeguards. For example, restrictions on transfers outside the founder’s bloodline are often strongly recommended.
There are also important tax distinctions between trust and individual ownership.
From an inheritance tax perspective, trusts generally fall within the “relevant property regime”, meaning the value of trust assets can be subject to inheritance tax charges of up to 6% every ten years and on exit from the trust. By contrast, shares owned outright are subject to inheritance tax at 40% on death, subject to any available reliefs.
Income tax treatment can be more complex for trusts. Trust income is typically taxed at the highest rates, although in some cases beneficiaries may be able to reclaim tax if they are basic or higher rate taxpayers.
While trusts offer flexibility and protection, they are more administratively burdensome than outright ownership. Ongoing compliance obligations can include trust accounts, tax returns, registration requirements and associated costs. Establishing a trust also involves upfront expenses.
For families with an existing trust, it may be worth considering whether it can be integrated into the FIC structure. Where no trust exists, careful thought should be given to whether the additional benefits justify the added complexity.
Choosing the right ownership structure for FIC shares is a critical part of long-term family and tax planning. Trusts can offer control, protection and flexibility across generations, while outright ownership remains simpler but less robust. The optimal approach will depend on the family’s objectives, appetite for administration and long-term planning goals.
