1975 problems but a relationship breakdown isn't one

What happens when someone makes provision for a family member in their will, but that provision is at the mercy of the trustees – and, worse still, the beneficiary and a trustee are at loggerheads? In a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act), a widow who found herself in these circumstances argued that her late husband’s will did not make reasonable financial provision for her. The High Court in Ramus v Holt and others disagreed.

Under his will, Christopher Ramus gave his wife, Elizabeth Ramus, a life interest in the residue of his estate. Life interest trusts are a common estate-planning tool: they give flexibility to testators and trustees and can be a tax-efficient way of passing on wealth. As the life tenant, Mrs Ramus would be entitled to the income produced by trust property during her lifetime. She would not, however, be entitled to the capital of the trust property. As is typical, the trustees had wide-ranging powers, including a power to terminate Mrs Ramus’ life interest early at their discretion.

The issue here was that one of the trustees was Mr and Mrs Ramus’ daughter, Claire Holt. The relationship between Mrs Holt and Mrs Ramus had deteriorated over the years, to the point that Mrs Ramus feared that the trustees would terminate her life interest if her own resources were judged to be sufficient to maintain her lifestyle without the trust fund (such course of action would have been in accordance with guidance provided by Mr Ramus to the trustees in a letter of wishes signed prior to his death). Mr and Mrs Ramus’ relationship had also broken down; the two were in the process of divorcing at the time of Mr Ramus’ death.

Mrs Ramus therefore began proceedings under the 1975 Act, which allows certain individuals (generally close family and dependants) to bring a claim against an estate where the will does not make reasonable financial provision for them. Mrs Ramus sought (among other things) an order (i) to remove the trustees’ power to terminate her life interest and (ii) to replace the trustees.

The claim failed on the basis that Mrs Ramus’ life interest under the will did in fact constitute reasonable financial provision. The judge reached this conclusion after considering that Mrs Ramus was unlikely to receive anything on divorce and was already wealthy in her own right. In any event, the court held that it did not have jurisdiction under the 1975 Act to appoint or remove trustees of an existing will trust.

Crucially, the court acknowledged that “Mrs Ramus’s real complaint [was] the identity of the trustees” and held that the strained relationship between Mrs Ramus and Mrs Holt did not have any bearing on whether the financial provision was reasonable: “reasonable financial provision from the estate of the deceased does not become unreasonable financial provision because of the identity of the trustees”. Moreover, the replacement of Mrs Holt as trustee would be unlikely to improve Mrs Ramus’ position. Firstly, Mrs Holt could not unilaterally terminate Mrs Ramus’s life interest – the trustees’ decision needed to be unanimous. Secondly, any replacement trustee might just as easily favour terminating the life interest in the circumstances set out in Mr Ramus’ letter of wishes.

Personality clashes, whether long-standing or initiated by the emotional turmoil of a death, are regrettably common features of probates. This judgement will therefore offer comfort to executors and trustees that difficult relationships should not undermine their role, provided of course that they are acting in accordance with their fiduciary duties. It will also be welcomed by estate-planning practitioners: a judgement in Mrs Ramus’ favour would arguably have reduced the appeal of the life interest trust, a crucial tool in their kit.