A FIC will not always be preferable to a trust but can be in certain circumstances. Here we look at the advantages/disadvantages of the two routes:
•Lifetime gifts into a trust in excess of £325,000 are generally subject to an immediate 20% IHT charge as a chargeable lifetime transfer. This tax charge does not apply to gifts of shares in a FIC as those gifts will, if made to an individual, be potentially exempt transfers (PETs). However, gifting shares can incur CGT but little or no gain would exist on recently created shares.