Family Investment Company

eskbanker

Marcon said:
unfortunately  two things are certain in life: taxes and death, the latter being notoriously unpredictable

The former has also been pretty unpredictable over the past couple of months

cfw1994

valueman1 said:

I have been advised to set up an FIC to avoid IHT and pass money on to my kids.   There seem to be advantages over Trusts post Gordon Brown. My children are terrible with money so want them to have the money when they are older, say 40.  Does anyone have any first hand experience?

How old are your children?
If they are terrible with money - then maybe train them, teach them. 

Most children start off knowing very little about the value of money, & our education system doesn’t naturally teach them.   Parents ought to take an active interest in helping correct that, from as early as possible.   

Banks like Santander offer junior accounts from around 12 that start to give them understanding of savings, and as they get older, the facilities grow.  Ours are now mid-20s, into their careers (albeit not settled in one area yet), with their own LISA, ISA, pension, & a decent understanding of save v spend.  From time to time, they even buy us a drink or meal 😎👍

It strikes me as pointless and controlling to try to limit their access to monies until they are 40.   I suspect they will likely resent the fact you didn’t help them lead their lives by helping them sooner 🤷‍♂️

& no, my apologies, I don’t meet your desired requirements to find someone with a FIC scheme: we are trying to simplify our finances so when the inevitable happens, our offspring won’t have to unwind any complex trusts, etc.  That was advice I took some years ago…but feel free to pay a professional to get their take 😉

valueman1

cfw1994 said:

valueman1 said:

I have been advised to set up an FIC to avoid IHT and pass money on to my kids.   There seem to be advantages over Trusts post Gordon Brown. My children are terrible with money so want them to have the money when they are older, say 40.  Does anyone have any first hand experience?

How old are your children?
If they are terrible with money - then maybe train them, teach them. 

Most children start off knowing very little about the value of money, & our education system doesn’t naturally teach them.   Parents ought to take an active interest in helping correct that, from as early as possible.   

Banks like Santander offer junior accounts from around 12 that start to give them understanding of savings, and as they get older, the facilities grow.  Ours are now mid-20s, into their careers (albeit not settled in one area yet), with their own LISA, ISA, pension, & a decent understanding of save v spend.  From time to time, they even buy us a drink or meal 😎👍

It strikes me as pointless and controlling to try to limit their access to monies until they are 40.   I suspect they will likely resent the fact you didn’t help them lead their lives by helping them sooner 🤷‍♂️

& no, my apologies, I don’t meet your desired requirements to find someone with a FIC scheme: we are trying to simplify our finances so when the inevitable happens, our offspring won’t have to unwind any complex trusts, etc.  That was advice I took some years ago…but feel free to pay a professional to get their take 😉

One of my children has ADHD and the other is severely dyslexic,  if I give them the money and they don’t spend it all but do get married and then they get divorced (like their parents and grandparents) then they will lose at least 50% to their spouse probably.  I am not being controlling, I’m being practical.

Keep_pedalling

valueman1 said:j

cfw1994 said:

valueman1 said:

I have been advised to set up an FIC to avoid IHT and pass money on to my kids.   There seem to be advantages over Trusts post Gordon Brown. My children are terrible with money so want them to have the money when they are older, say 40.  Does anyone have any first hand experience?

How old are your children?
If they are terrible with money - then maybe train them, teach them. 

Most children start off knowing very little about the value of money, & our education system doesn’t naturally teach them.   Parents ought to take an active interest in helping correct that, from as early as possible.   

Banks like Santander offer junior accounts from around 12 that start to give them understanding of savings, and as they get older, the facilities grow.  Ours are now mid-20s, into their careers (albeit not settled in one area yet), with their own LISA, ISA, pension, & a decent understanding of save v spend.  From time to time, they even buy us a drink or meal 😎👍

It strikes me as pointless and controlling to try to limit their access to monies until they are 40.   I suspect they will likely resent the fact you didn’t help them lead their lives by helping them sooner 🤷‍♂️

& no, my apologies, I don’t meet your desired requirements to find someone with a FIC scheme: we are trying to simplify our finances so when the inevitable happens, our offspring won’t have to unwind any complex trusts, etc.  That was advice I took some years ago…but feel free to pay a professional to get their take 😉

One of my children has ADHD and the other is severely dyslexic,  if I give them the money and they don’t spend it all but do get married and then they get divorced (like their parents and grandparents) then they will lose at least 50% to their spouse probably.  I am not being controlling, I’m being practical.

Why do you assume that any future DIL will be contributing nothing to the house purchase? 

You say you want to protect your as yet unborn GC, but how does your shame protect them if their father clears of with someone else leaving their mother to bring them up alone with no security on her home?

valueman1

Keep_pedalling said:

valueman1 said:j

cfw1994 said:

valueman1 said:

I have been advised to set up an FIC to avoid IHT and pass money on to my kids.   There seem to be advantages over Trusts post Gordon Brown. My children are terrible with money so want them to have the money when they are older, say 40.  Does anyone have any first hand experience?

How old are your children?
If they are terrible with money - then maybe train them, teach them. 

Most children start off knowing very little about the value of money, & our education system doesn’t naturally teach them.   Parents ought to take an active interest in helping correct that, from as early as possible.   

Banks like Santander offer junior accounts from around 12 that start to give them understanding of savings, and as they get older, the facilities grow.  Ours are now mid-20s, into their careers (albeit not settled in one area yet), with their own LISA, ISA, pension, & a decent understanding of save v spend.  From time to time, they even buy us a drink or meal 😎👍

It strikes me as pointless and controlling to try to limit their access to monies until they are 40.   I suspect they will likely resent the fact you didn’t help them lead their lives by helping them sooner 🤷‍♂️

& no, my apologies, I don’t meet your desired requirements to find someone with a FIC scheme: we are trying to simplify our finances so when the inevitable happens, our offspring won’t have to unwind any complex trusts, etc.  That was advice I took some years ago…but feel free to pay a professional to get their take 😉

One of my children has ADHD and the other is severely dyslexic,  if I give them the money and they don’t spend it all but do get married and then they get divorced (like their parents and grandparents) then they will lose at least 50% to their spouse probably.  I am not being controlling, I’m being practical.

Why do you assume that any future DIL will be contributing nothing to the house purchase? 

You say you want to protect your as yet unborn GC, but how does your shame protect them if their father clears of with someone else leaving their mother to bring them up alone with no security on her home?

Well that serves the DIL right for being a gold digger in the first place, tough. At least my son will be able to buy a home post divorce rather than being destitute like most divorced dads. Maybe the kids could live with him half the time.

valueman1

cfw1994 said:

valueman1 said:

I have been advised to set up an FIC to avoid IHT and pass money on to my kids.   There seem to be advantages over Trusts post Gordon Brown. My children are terrible with money so want them to have the money when they are older, say 40.  Does anyone have any first hand experience?

How old are your children?
If they are terrible with money - then maybe train them, teach them. 

Most children start off knowing very little about the value of money, & our education system doesn’t naturally teach them.   Parents ought to take an active interest in helping correct that, from as early as possible.   

Banks like Santander offer junior accounts from around 12 that start to give them understanding of savings, and as they get older, the facilities grow.  Ours are now mid-20s, into their careers (albeit not settled in one area yet), with their own LISA, ISA, pension, & a decent understanding of save v spend.  From time to time, they even buy us a drink or meal 😎👍

It strikes me as pointless and controlling to try to limit their access to monies until they are 40.   I suspect they will likely resent the fact you didn’t help them lead their lives by helping them sooner 🤷‍♂️

& no, my apologies, I don’t meet your desired requirements to find someone with a FIC scheme: we are trying to simplify our finances so when the inevitable happens, our offspring won’t have to unwind any complex trusts, etc.  That was advice I took some years ago…but feel free to pay a professional to get their take 😉

Well your kids won’t appreciate it when they hit 40 have been divorced and lost everything and spent all their money, as opposed to mine who will be grateful that they not had the money until post divorce and when they have grown up and can look forward to a secure financial future.

valueman1

dunstonh said:

How many millions of pound are you talking about here?  (usually you would be talking multi-million pounds when considering these)
A husband and wife with property and children gets £1m IHT allowance.  So, that is the first million taken care of.

Pensions are not included in the estate.  So, you can hold a couple more million in pensions with good planning (and assumption that higher asset values means more income is available - which may or may not be correct or possibly too late).   

You will have alternative tax to pay and possibly accountant costs depending on structure.  Corporation tax is going up from 19% flat to 19% on first £50k, 26.5% on next £200k and 25% above that.    If you already have a limited company through your business, then 19% band is reduced by 50% on each company.

You is potential for big savings but there is potential for paying more than you need be ignoring alternative options.

There is also the potential that the government will change taxation and you could end up worse off.

The same can be said for aim shares and trusts in general.  I believe you can retain preference charges to allow you to control dividends during your own lifetime without impacting the PET period.

bostonerimus

It sounds like a family trust is what you want so that the money can be managed for your children's benefit. 

handful

Benefits of family investment companies

In simple terms, if you set up a family investment company, you put cash or assets into that company, create different types of shares in your company and give the shares that hold the capital value of the assets to your children.

To allow you to keep control over the assets in the company, you can be named as a director and be a preferential shareholder, so you have all the voting rights but no rights to the capital. If you adopt that approach, as long as you keep no beneficial interest in the company, then after seven years the value of the money or property transferred will fall outside of your estate for inheritance tax purposes.

There are also tax advantages, including relief for interest paid on mortgages. Additionally, profit from your investments will be subject to the lower corporation tax rather than the higher rate income tax.

Importantly, transferring cash into a family investment company is not subject to the initial inheritance tax charge of 20% if it exceeds the available nil rate of £325,000. This makes an FIC an appealing option for people who want to transfer funds in excess of £325,000 to their children, whilst maintaining control of those funds.

Disadvantages of family investment companies

No government is afraid to change tax law. This may seem like an area bound by strict rules, but it is reviewed and changed frequently. If the government shines a spotlight on family companies, this could lead to another shakeup. Should the law be changed, possibly retrospectively, this would catch many people out. To minimise the impact of this potential risk, make sure you review your family company’s structure regularly with your lawyer, to keep up to date with any legal changes.

Another issue often overlooked is the cost of setting up a family company. Lawyers, including corporate solicitors as well as accountants will need to be involved and this can incur lots of initial charges.

Bear in mind that if you’re putting a property into the company rather than cash, this could result in capital gains tax and there is potential stamp duty to consider. If you’re planning on regularly distributing the income of the company, this would have a negative tax implication. The only way to get money out is through dividends, resulting in you paying both corporation and income tax, which together would be higher than if the asset was held directly.

How do I know what’s right for me?

Family companies work best for those with a substantial amount of money to invest (£1m plus) and who are willing to keep it in the company to grow, rather than take it out on a regular basis. They’re also a good option for those who want to avoid a large inheritance tax charge and retain control over their assets, especially if their children are younger.

As an alternative, family trusts provide an accepted and arguably safer structure, which usually costs less to establish.

In some cases, it’s also worth considering an outright gift. Although this offers no control or protection over your assets, it may be appropriate for those seeking a simpler way to pass their wealth onto older and responsible children. However, check if there might be inheritance and capital gain tax implications.

Ultimately, your decision should be based on your individual circumstances and advice from a lawyer and accountant(and not random people on the internet - FTFY). Take time to assess your options and don’t be too swayed by the growing popularity of family companies. They have their benefits but there are risks too, so weigh up both the pros and cons before you go ahead.

Mrs_pbradley936

If you pay £400 to these people they will give you a bespoke consultation Property118 | Inheritance tax and legacy planning for property company owners

I have no idea if that is more or less than a IFA but you will have to be prepared to give them all of your financial details and they will tell you if an Family Investment aka Smart company is worth your while.