Blog

Trust funds have always been regarded as one of the most important ways to protect a family’s fortune, but recent developments have been made against it. Anti-avoidance legislation, for instance, has prompted families to look for alternatives. While ownership of property and wealth is willingly given, most people require the need to retain control of the processes.

This is where family investment companies come in. As the best alternative to keeping fortune protected, wealthy families from all over the country now realise that the best way is simply split ownership control. In family investment companies, ownership rests with the shareholders, which pertains to the family members.

Assets remain as protected as ever, and the board will be given the power to appoint successors—in other words, a family investment company operates much like a firm. To fully grasp its relevance, here is a quick guide for you. 

Why is it important?

Family investment companies exist for one sole reason—asset protection. It preserves a family’s wealth for generations to come, especially since family fortunes face a number of risks. There is extensive taxation, bankruptcy, divorce, and even spendthrifts and sheer management incompetence. 

Family investment companies come with articles and rules that dictate provisions, allowing shareholders to buy back shares should bankruptcy or divorce to ever occur. Such dividends will remain at market value, making it the perfect way to preserve wealth. 

What must you consider before applying?

• Corporate tax: Keep in mind that the rates applicable are lower than income tax—this means that the family can gain a significant advantage, especially if the main goal is to retain funds within the company, and only reinvesting when necessary. Other receipts are also tax-free, but interest income and rents must always be subjected to corporation tax. 

• Real estate planning and inheritance taxes: Although share values remain within the holder’s estate, keep in mind that it’s possible to establish new shares, especially if it has limited current value. If the company is incorporated, shares can be given away as gifts to family members, all without the repercussions of immediate tax charges. 

• Management charges: As a business operation, the family investment company will likely have incurred expenses. Such expenditures will come from investments and other necessary transactions, and with that, relief can be made available. This includes investment management fees, which can be claimed as tax relief. However, individuals are not eligible for such assistance. It must be filed and claimed as a company, along with the deduction for salaries and pension contributions paid on behalf of the directors and employees. 

The Bottom Line

Wealth can easily fall prey to various external factors, such as bankruptcy, mismanagement, and divorce. From everything gathered, however, it is logical to deduce that family investment companies are indeed effective alternatives to trust funds. They can be used for real estate planning, tax planning, and above all, keeping family wealth intact. Although the benefits are undeniable, carefully planning and consideration must be made, especially when it comes to the structure of the company. 

To ensure that you get the best possible benefits from family investment companies, the expert touch of a professional may be necessary. For wealth management services in Cardiff, Harry Robinson is the place to call. We have dedicated ourselves to helping clients find a better financial life, both for themselves, their families, and their businesses. We believe that wealth management must be attainable and straightforward—only then can a financially healthy life can ensue! Reach out to us today to learn more. 

*Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James's Place and along with Trusts are not regulated by the Financial Conduct Authority.