Registered number: 10816512.
Registered office: Squiggle Consult Ltd, Suite 2069, Letraset Building, Wotton Road, Ashford, Kent, TN23 6LN
Squiggle Consult Ltd. is a limited company registered in England and Wales.
Some lifetime trusts on the market are based on older templates that pre-date the Residence Nil Rate Band and current tax rules, and they can be too restrictive for today's property values in much of the country.
The Estate Allocation Trust (EAT) was drafted from scratch around current legislation and is available through Squiggle, designed to reduce the risk of the tax charges that older-style lifetime trusts can trigger; tax outcomes always depend on your circumstances.
A lifetime trust is one you set up and fund during your life, as opposed to a trust created only by your Will after your death. Done properly, a lifetime trust can shelter your assets from probate (the legal process for dealing with an estate after death), protect what you leave from certain risks that beneficiaries might face, and form the cornerstone of an Inheritance Tax plan. Done badly, a lifetime trust can create immediate tax charges, restrict your own access to your home, or simply fail to work as intended because it was never properly maintained.
The EAT is designed to avoid the pitfalls of older-style lifetime trusts while retaining all of the genuine benefits.
Everyone has an Inheritance Tax-free allowance of £325,000 (the "nil rate band", or NRB, the value of your estate up to this amount is free of Inheritance Tax on your death). In addition, everyone has the right to up to £175,000 more when a home passes to children or grandchildren (the "Residence Nil Rate Band", or RNRB). The EAT is built specifically around protecting both of these allowances.
A surviving spouse or civil partner can also claim any unused allowance from the first partner to die (the "transferable nil rate band" and "transferable RNRB"). The EAT accounts for this too.
Each person putting assets into the trust, each "settlor" (the person who puts their own assets into the trust), has their assets held in a separate fund within the same trust document. For a couple, these are typically called Fund A and Fund B. Each fund can have different beneficiaries, trustees and protectors. Keeping the funds separate protects each person's share and, for tax purposes, prevents any "blending" of the two people's allowances, which is a common flaw in older joint lifetime trusts.
Within each fund, assets are automatically allocated across up to four sub-funds, each designed for a specific purpose:
This sub-fund holds just enough of the property to qualify for the Residence Nil Rate Band on your death. It is held on a bare trust (the simplest kind of trust, where the beneficiary's entitlement is fixed and immediate, with no ongoing trustee discretion) for you, which means the asset still counts as yours and passes under your Will. This is exactly what the RNRB rules require: the home must pass to a direct descendant, and bare trust treatment is intended to satisfy the RNRB conditions, which ultimately depend on your estate and the rules at the time of your death.
This sub-fund holds any portion needed to claim a transferable Residence Nil Rate Band (TRNRB), the unused RNRB from a spouse or civil partner who died before you. Like the RNRB sub-fund, it is held on bare trust and passes under your Will.
This is the heart of the EAT. It is capped by the trust deed at your available nil rate band at any given time, normally £325,000, though this is reduced if you have made other gifts into trust in the seven years before setting this trust up.
Normally, putting assets into a lifetime trust can trigger an immediate Inheritance Tax charge (a "chargeable lifetime transfer"), plus ten-year anniversary charges of up to approximately 6% on the trust value above the nil rate band, and exit charges when assets leave the trust. Because the main trust fund is capped at your tax-free allowance, the structure is designed so that none of those charges should normally arise, though the position always depends on your circumstances and on valuations at the relevant time.
Within this fund, you keep the right to benefit from the assets for life: in trust terms, you are the "life tenant" (the person who has the right to benefit from the trust assets during their lifetime). Beyond that, the trustees have discretion over how the assets are used for you and your chosen beneficiaries, making this portion a "discretionary trust" (a trust where the trustees decide, within the limits set by the trust deed, how and when assets are used for beneficiaries).
Anything left over after the other three sub-funds are filled sits here, on bare trust. It passes under your Will, where the trusts written into your Will decide what happens to it. This is important: the XS sub-fund ensures that no assets are "stranded" in the main trust fund simply because their value has grown above the nil rate band.
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Each settlor can appoint a protector: a trusted person (often a close family member or trusted friend) whose approval is needed for any change of trustee or any distribution from their fund. This gives you an extra layer of security: even if the trustees wanted to act in a way you would not have approved of, the protector has a veto.
Each settlor can name in their Will who replaces them as trustee on their death. This prevents the trust from being left without adequate trustee oversight when you are no longer there.
A well-drafted Will trust protects assets on the first death of a couple, typically by directing the first person's estate into a trust for the survivor's benefit rather than passing outright to them. An Estate Allocation Trust is designed to protect assets on both deaths, and during your lifetimes too.
Assets held in the trust are generally better protected from challenges after you die. The structure can also help shelter your estate from the time, cost and delay of probate (the legal process of applying for authority to deal with a deceased person's estate), because trust assets do not normally form part of the probate estate.
Because you keep the right to benefit, assets in the EAT remain part of your estate for Inheritance Tax on your death. The EAT's purpose is protection and probate efficiency; Inheritance Tax mitigation is a separate exercise, covered in our Inheritance Tax Mitigation factsheet.
Imagine David and Anne, a married couple in their early sixties, who own their home jointly and have savings and investments totalling just under £650,000 between them. They are concerned about what happens on the second death, specifically that their children might face a significant Inheritance Tax bill, or that assets passed outright might be at risk from a child's future divorce.
They set up an Estate Allocation Trust through Squiggle. David's assets (Fund A) and Anne's assets (Fund B) are kept separate within the trust. Each fund allocates the home's value correctly across the RNRB and TRNRB sub-funds so that both the Residence Nil Rate Band and the transferable allowance are preserved on each death. The main trust fund in each case is capped at £325,000, with the EAT designed so that no immediate Inheritance Tax charge arises and no ten-year anniversary charges should normally apply.
During their lives, David and Anne remain the life tenants of their respective main trust funds; they can benefit from the assets as before. Their Wills direct the XS sub-fund into a trust for the surviving spouse and children. Each appoints the other as protector of their fund.
When Anne dies first, her assets pass under the trust and her Will as planned, without a full probate process for those assets. When David dies some years later, the same happens. The children inherit through the trusts set up in the Wills rather than outright, giving them protection against life's "what ifs."
Outcomes depend on individual circumstances, asset values, and the law at the time. This is a hypothetical example for illustration only.
A lifetime trust is a serious legal arrangement, not a magic box. Setting one up has costs; it must be funded and maintained correctly to work as intended, and tax outcomes depend on your circumstances and on how the law applies to them.
Care fees: to be clear, a lifetime trust cannot be used to deliberately avoid care fees. Local authorities can challenge transfers made with the intention of avoiding a care fee assessment, and there is no time limit on such a challenge. Our standard practice is to talk you through both the benefits and the limitations before you decide, and anyone who suggests a trust is a guaranteed way to protect assets from care costs is not giving you accurate information.
Capital gains tax: transferring assets into a lifetime trust is a disposal at market value. Because you keep the right to benefit, holdover relief is not available, so investments standing at a gain can trigger an immediate CGT charge. Your main home may be covered by private residence relief. We review this before any asset is transferred.
Ongoing administration: a trust needs to be run properly. See our Trust Administration factsheet for what this involves. In particular, the Trust Registration Service deadline of 90 days applies to lifetime trusts, and ten-year anniversary charges should be planned for even if the structure is designed so they should normally be low or nil.
This is personal: the right outcome depends on your assets, your family and your aims. Not everyone who comes to Squiggle leaves with a lifetime trust, sometimes a Will trust is the better answer, or a combination of both.
Choosing an off-the-shelf template trust. Older template trusts were drafted for a different tax landscape. They may not account for the RNRB, may cap the fund at the wrong level, or may blend the two partners' allowances in a way that costs rather than saves tax.
Funding the trust incorrectly. The trust only protects assets that are actually in it. If the trust is set up but the assets are never formally transferred into it, it has no effect.
Not maintaining it. A trust is a living arrangement. Changes in the law, in the family, or in the assets held may all require the trust to be reviewed and updated.
Expecting it to solve a care fees problem. As above, this is not what a lifetime trust is for, and suggesting otherwise is misleading.
Assuming one trust suits all couples equally. In a couple, each person's nil rate band is their own. A trust structure that works perfectly for one person's assets may not be optimal for the other's, which is why the EAT keeps the two funds entirely separate.
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Trust planning should always follow personal advice.
This factsheet is general information for England and Wales, not legal, tax or financial advice. Last reviewed: June 2026.
Registered number: 10816512.
Registered office: Squiggle Consult Ltd, Suite 2069, Letraset Building, Wotton Road, Ashford, Kent, TN23 6LN
Squiggle Consult Ltd. is a limited company registered in England and Wales.
