Our clients John aged 45, a founding partner of a successful Private Equity firm and his wife Anna, approached us as they were seeking to understand how an exit from the firm’s partnership might be quantified in terms of their lifestyle and objectives for their wider family.

In light of the significant windfalls expected over a five-year period and the heavy weighting towards John across the family’s asset base, we worked alongside the family’s existing tax adviser to assign the Offshore Bond set up by the family’s previous adviser into Anna’s sole name diverting the encashment proceeds to a Family Investment Company to allow for greater flexibility in future planning.

The company structure allowed John and Anna to move the ownership of large parts of their asset base away from their personal names, an unlimited structure was used for privacy reasons. They also made their two adult children director shareholders in the company and have used employer pension contributions to move funds from the company into the more inheritance tax-efficient pension wrapper. The company will also provide a structure to house the carried interest payments expected by John over the next five years which can be passed to the company by way of loan, allowing funds to be extracted from the business in the future without a tax charge.

We worked with the family’s tax advisers to set up “alphabet shares” within the Family Investment Company, entitling John and Anna’s children to any growth on the invested capital, but without voting rights at this stage.

We also introduced the family to a suitable family solicitor who has drafted pre-nuptial agreements for the children. This will help to ensure that the family wealth is protected for future generations in the event of divorce.

We have utilised previous years’ unused pension funding allowance for Anna using her carry forward allowance. She will continue to fund the maximum amount into her pension each year from the FIC, thereby removing the funds from her estate for inheritance tax purposes (IHT relief on pensions is subject to change from 6th April 2027). These transactions will also be deductible from the company’s corporation tax bill.

The couples joint personal GIA will allow them to make use of their respective dividend and capital gains allowances. We also systematically fund both of their ISA accounts each year from the GIA, gradually reducing their liability to capital gains tax.

We have appointed multiple external investment managers to manage different parts of the family’s overall invested wealth.  Each mandate has been set in accordance with the associated structure where the funds are held and the specific expertise of each investment manager. 

In light of their charitable goals, we have introduced the family to a philanthropic agent. As a result of this introduction, the family have set up a Donor Advised Fund (DAF) which will be used as a structure for the family to donate appreciated assets held in their personal names. This will mitigate any capital gains tax burden whilst allowing the funds to remain invested, with different investment pots structured to align with their short, medium and long-term philanthropic endeavours.

This case study is intended as illustrative purposes only, it does not constitute individual advice and should not be used to inform financial decisions.

They are based upon our understanding (at the time of advice) of current law, HM Revenue and Custom's practice, tax rates and exemptions, which are subject to change.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.