The blended FIC: a company and a trust, working together.

Typically the parents or grandparents hold freezer shares, usually with the votes, so they keep control and their value is fixed. The children hold growth shares in their own classes, and a discretionary trust holds another class of growth shares for wider family or future generations. Alphabet classes let the directors choose which class receives a dividend. The split varies by family, and we design it from a blank piece of paper.

The company. Freezing the parents' value and placing the growth in other shares is what moves future growth outside their estates, and gifts of shares to individuals are potentially exempt transfers with no entry charge. The trust does not add to that saving and brings its own charges. What it adds is flexibility over who benefits and a layer of protection, and whether that is worth the extra cost depends on the family.

Alphabet shares are separate classes of the same type of share, so the directors can declare a dividend on one class and not on others. In a blended FIC that means income can go to the child with the lower tax rate, to the trust, or be retained, without dividend waivers, which HMRC can challenge as settlements. Each class must carry real capital rights as well as income, or the settlements rules can bite.

Adult children can be trustees, often alongside an independent trustee, but there are conflicts to think about. A child who is both a trustee and a beneficiary may be deciding on their own benefit or on their siblings', which can cause tension. Many families appoint one trusted family member and one independent person, so decisions are not left to either side alone. The trust deed can say who may be appointed and how trustees are replaced.

The trustees have discretion, so they can pay more to a child who needs help, pay less to one who is financially secure, or hold back if a child is going through a divorce or facing creditors. That flexibility is the main benefit of a trust, and a letter of wishes can guide the trustees. They must still act within the deed and consider all beneficiaries, and appointing shares or capital out of the trust can bring an exit charge.

A gift into a discretionary trust is a chargeable lifetime transfer, not a potentially exempt transfer. Tax is charged at 20% only on the excess over the settlor's available nil-rate band, currently £325,000, and each parent can use their own. Because the trust usually subscribes for newly issued growth shares at a low starting value, the transfer is often small. Later growth is then subject to the trust's periodic charges.

It is more complex and costs more to set up and run than a simple FIC. The trust brings its own inheritance tax charges, up to 6% every ten years and on exits, its own tax return and registration obligations, and its income is taxed at trust rates. The settlor cannot benefit. And any structure that leaves parents in control needs care over the gift with reservation rules. For smaller sums, a simpler company may be better.

When you want flexibility over who benefits, particularly for grandchildren not yet born, when you are concerned that giving a child outright ownership creates risk, or when you want some growth held one step removed from any individual. When the family is small, the amounts modest or the wishes simple, a company with only family shareholders may be enough. The choice comes from your objectives and family dynamics rather than from a template.

By the share classes. Each class subscribes for its own shares and takes the growth on them, so the split is built into the articles at the start, together with the hurdle for each class. Dividends can then be directed class by class, but capital follows the shares. Changing the split later usually means issuing new shares or altering rights, which can have inheritance tax and capital gains tax consequences, so we settle it with the family early.

It is a risk to manage, not one to ignore. Control alone through voting freezer shares is not usually treated as a reservation of benefit, and arm's-length directors' fees are usually fine. But any benefit that parents take from gifted shares, or any ability for the settlor to benefit from the trust, can bring the shares back into the estate. We design with that in mind and recommend you take advice before using any retained rights.

The parents' freezer shares form part of their estates at their fixed value and pass under their wills or the intestacy rules, so the articles and wills should work together to decide who takes the votes. Growth shares held by children and the trust are already outside the estates. The trust carries on, with its trustees continuing to hold its shares. A shareholders' agreement can set out succession of control.

Yes, and it is a common variation. Grandparents can fund or hold freezer shares while parents and the next generation hold growth shares, or both generations can contribute. Gifts from grandparents to minor grandchildren generally fall outside the parental settlements rule, though HMRC looks at reciprocal arrangements or where a parent provides the money. Each person who settles uses their own available nil-rate band.

No. It is our signature approach and suits families who want control, a growth transfer and some flexibility or protection through a trust. It is not suitable if the sums are small, if the parents need the capital back, or if the family would find the trust and company combination hard to run. We design each structure around what the family wants, and sometimes the answer is a simpler company or no company at all.

They hold the trust's growth shares on behalf of the beneficiaries and decide, within the powers in the trust deed, who receives dividends or capital and when. They exercise any rights attached to the trust's shares, usually with a letter of wishes from the family to guide them, keep trust records, register the trust, and file tax returns where income arises. Choosing trustees who are trusted, available and able to act independently is one of the key design decisions.

Trustees pay income tax at 39.35% on dividends in 2026/27, and 45% on other income. A trust with net income of £500 or less pays no income tax on it, but above that the whole amount is taxable. When trustees pay income to a beneficiary, the beneficiary's own tax position then matters. Directing dividends to the family member best placed to receive them is one reason for using alphabet shares.

Usually yes, because the trust adds its own administration: registering on the Trust Registration Service, keeping the trust's records, and filing tax returns where income arises. You also need trustees who understand their role. The extra cost has to be set against the extra flexibility and protection, and for smaller sums a simple company may be the better value. We discuss the running costs before you commit.

It can be done with care, usually by issuing new growth shares to a new or existing trust and, where needed, altering the rights of existing shares. Changing share rights in a close company can be a transfer of value for inheritance tax and a value shift for capital gains tax, so it needs advice. Where the company is young and the values low, the cost of adapting it is often modest.