A recent case has highlighted that, where a spouse is left a life interest in an estate, in certain circumstances it can be considered reasonable financial provision – this was held to be the case even where that life interest could be terminated by the trustees and the spouse’s relationship with the trustees was difficult.
This example is notable to practitioners in the field given that often it is expected that a spouse would be entitled to outright provision rather than simply a life interest. It should be noted that that the circumstances of this case were material to the Court’s considerations and the surviving spouse’s own assets were highly relevant to the conclusion.
This case (Ramus v Holt [2022]) concerned an Inheritance Act claim by the widow of a businessman on the basis that his Will did not make reasonable provision for her.
Mrs Elizabeth May Ramus (“Mrs Ramus”) had been married to Mr Christopher Stewart Ramus (“Mr Ramus”) for 48 years. They had two children together, Claire Holt (“Mrs Holt”) and Alistair Ramus (“Alistair”). The couple started a seafood business together in the Harrogate area which grew to become a highly successful enterprise, allowing them to live a financially comfortable lifestyle.
The marriage was generally amicable, however at times they experienced marital difficulties. Mrs Ramus outlined that Mr Ramus had a history of overbearing and controlling behaviour. Mr Ramus also had a historically fraught relationship with both children during his lifetime. Mrs Ramus herself also indicated she had a difficult relationship with her daughter, Mrs Holt, who deemed her an “absent grandparent”.
The breakdown of the Ramus marriage came to a head in 2019 when Mrs Ramus sought to leave her husband. The separation came as a shock to Mr Ramus and during this difficult period, he was primarily supported by Mrs Holt. On 23 June 2020, whilst Mrs Ramus was in the process of moving into her new rented accommodation out of the matrimonial home, and during a period where he had been looking for alternative accommodation, Mr Ramus sadly took his own life.
The Will
Mr Ramus executed his last Will on 30th April, 2014. He had also made three separate codicils on 15th September, 2015, 13th July, 2017 and 20th September, 2019, the last of which appointed Mrs Holt, Mr Armitage (long standing friend and accountant/insolvency practitioner) and Mr Wardle (director of a wealth management company) as trustees.
The Will provided Mr Ramus’ personal chattels were to go to Alistair, a fund of £50,000 was to be set aside for his five grandchildren in equal shares contingent on them reaching the age of 25 and further pecuniary legacies in a total sum of £9,000.
The residuary estate was held in a discretionary trust, in which Mrs Ramus had a life interest and so was entitled to receive income from the trust for life. This was subject to the absolute discretion of the trustees who also had the power to terminate her life interest.
On the day of completing his third codicil to the Will, altering the identity of the executors and trustees, Mr Ramus signed a letter of wishes giving non-binding guidance to the trustees about the exercise of their discretion. The letter stated, among other points of guidance for the trustees, the following:
“My current matrimonial circumstances are uncertain. If my wife survives me I still wish that she will have a right to income from the Trust Fund to the extent that it prevents hardship and enables her to maintain her lifestyle. I would like this to continue for as long as you feel necessary. If her own resources are such that she does not require that income, then you should consider exercising your powers to remove her right to income in all or part of the Trust Fund.
I do not wish for my wife to receive capital payments from the Trust Fund in order to protect the fund for future generations.”
The Estate
The grant of probate was issued on 24th November, 2020 which confirmed the net value of the estate to be £1,082,818. The estate was comprised of half of the net proceeds from the sale of a commercial property at 132 -136 Kings Road which had sold for £640,000 (the premises of the family seafood business) and sums realised from the estate assets. As at the issue of the proceedings, the estate had cash funds of £1,016,243.80 with £50,000 set aside on trust for Mr Ramus’ five grandchildren less an estimated £6,000 relating to a tax liability.
The trustees remained of the position that the monies held in the trust should be invested and the income paid to Mrs Ramus as per the terms of the Will.
Mrs Ramus’ claim
By making a claim under the Inheritance (Provision for Family and Dependants) Act 1975, Mrs Ramus sought reasonable financial provision from the estate. It was clearly her view that her life interest was not reasonable provision. In her evidence, Mrs Ramus set out that she was looking for a property to purchase. As at the commencement of the proceedings, her assets totalled £1,225,416 plus a vehicle valued at approximately £27,000 – £30,000 and income from a pension of around £1,800 per month. Mrs Ramus’ monthly expenditure totalled £5,113.43. She argued that the only way she would be able to meet her monthly outgoings was through spending her capital and savings, therefore monthly income was required to avoid using the capital she required to purchase a new home. Underpinning this was Mrs Ramus’ argument that her husband had an obligation to make financial provision for her and if he was still alive and the couple divorced, an agreement would have been reached where he would provide her with monthly lump sums to meet outgoings.
In this respect the Court considered Mr Ramus’ letter of wishes where he stated Mrs Ramus was to receive income from the estate. Mrs Ramus also considered it relevant that following the death of her husband, she was advised that he had changed the name of his pension nominee to Mrs Holt meaning she would receive a pension lump sum of £500,000, which presumably Mrs Ramus would have otherwise received.
Mrs Ramus outlined she had made a full contribution to the marriage, helped in running the jointly owned, successful business and raised the couple’s two children. In her final witness statement, Mrs Ramus’ financial position was updated to be assets of £1,664,625.95 excluding the vehicle and pension income. Her updated monthly outgoings were £5,296.28.
Mrs Ramus did not believe that the Will as drafted made reasonable financial provision for her as the trustees could stop payment of the income to her at any time and refuse to advance any capital, under their absolute discretionary power. Mrs Ramus said she did not seek a large capital lump sum from the estate or seek to break the trust. Her financial circumstances were such that her capital was required to purchase a new home and provide a capital cushion and accordingly she maintained that her monthly income was not sufficient to meet her outgoings.
The defendant’s position
Mrs Holt queried her mother’s lifestyle, stating her alleged expenditure was highly exaggerated and that she had ample assets, both income and capital, to live comfortably. Mrs Holt also raised arguments in relation to the proposed property her mother intended to buy – she looked to spend £700,000, Mrs Holt said this was unnecessarily expensive for a property for one person in “advanced years”. Mrs Holt also criticised her mother for not considering the interests of the minor beneficiaries to the estate. Mrs Holt appeared to be concerned that Mrs Ramus was seeking a capital sum for the use of the couple’s son, Alistair, who had a difficult relationship with the family and a criminal conviction for fraud for which he served a custodial sentence.
Mrs Holt’s legal representative submitted that Mrs Ramus sought fixed monthly payments from the trust however she had not identified the amount of the fixed sum. Mrs Holt firmly opposed the claim and the remaining trustees had difficulty understanding Mrs Ramus’s rationale for making the claim. It was also considered that on a divorce cross check, which is a common starting point in such claims, Mrs Ramus would not receive more than her current asset level (£1.61m).
Further submissions were made by the Defendants that the court had considered evidence from Mrs Ramus’ financial adviser, however this was inadmissible opinion evidence that was not supported by expert calculation in this field.
In summary, the Defendants’ submissions concluded that Mrs Ramus had not made a case that the Will failed to make reasonable financial provision for her, and her main complaint appeared to be the identity of the trustees, particularly her daughter, and how they might exercise their discretion rather than her entitlement under the Will.
Judgment
The Court considered the legislation and its power to make an order under the Act. The Judge agreed with the submissions of the Defendants that Mrs Ramus’ real complaint was the identity of the trustees and the claim for reasonable financial provision was not based on the terms of the Will, but a personality clash with the trustees. The Judge was clear in stating that the claim could not succeed on this basis; reasonable financial provision from the estate of the deceased does not become unreasonable financial provision because of the identity of the trustees.
The Judge went on to state that the replacement of the named trustees would serve no purpose, as they would have the same power as their predecessors and would give appropriate weight to the wishes of Mr Ramus. This would therefore leave Mrs Ramus in no better position. The Judge then considered Mrs Ramus’ position that she receive a guaranteed fixed monthly income from the trust. This was difficult to order on the basis that the trust had not yet been invested and therefore would involve a potentially complex exercise for the trustees to navigate. The Judge concluded there was no jurisdiction for the removal of trustees under the Act and therefore the claim was dismissed.
On reading the judgment, it is hard to see how there could have been any other outcome with this factual matrix. While in many cases a divorce cross check for a spouse will lead to significant additional provision being reasonable, in this case because of the asset split as between husband and wife, it led to the conclusion that a divorce would have resulted in a similar outcome for the wife as her husband’s death.
It remains to be seen whether or not a subsequent dispute may arise if and when the trustees (if Mrs Ramus was right to be concerned about her daughter’s intentions) exercise their discretion if it is not done in a reasonable manner.
Perhaps this case was simply a warning shot to Mrs Holt to make sure she acts properly in her capacity as trustee as Mrs Ramus is clearly aware of her rights and will question the trustees’ decisions if she feels them unreasonable.
The trustees would be brave to seek to terminate her life interest in the knowledge Mrs Ramus has no fear of litigating where she feels she has not received what she ought to have done.
This case must have been an extremely expensive way to give that warning shot to Mrs Holt and will no doubt have further soured relations between the family members, as unfortunately so many of these cases do.
Alison Parry, Partner at JMW Solicitors
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