Roman Kubiak, Partner and head of the Contested Wills, Trusts and Estates team, and Meg Edwards, Solicitor, discuss the recent High Court decision in Ramus v Holt & Ors [2022] EWHC 2309 Ch in which the court dismissed a wife’s claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants Act) 1975.
Background
The deceased died, tragically, by suicide not long after his wife had begun divorce proceedings to end their marriage of 48 years.
The terms of his last will, varied by three codicils, provided for his residuary estate to be settled on trust for his wife, the claimant, for life with power by the trustees to apply capital to her at their absolute discretion. In other words, it was up to the trustees to decide if, and when, to provide capital to the wife from her late husband’s estate.
The deceased appointed their daughter (the first defendant) and two acquaintances (the second and third defendants) as trustees.
Rather uniquely, the trustees also had power under the trust to terminate the claimant’s life interest at their discretion, i.e. they could ultimately come to the decision that the claimant’s right to the trust had ended.
The deceased had also written a letter of wishes citing the ‘uncertain’ matrimonial circumstances and noting that, in the event that the claimant had sufficient resources, the trustees should consider exercising their power to terminate her interest in the trust fund.
The claimant had a fragmented relationship with her daughter, the first defendant, which led to her concerns that the trustees would not pay her sufficient income from the trust and may terminate her interest. She therefore issued proceedings under section 1(1) of the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) on the basis that the will did not make reasonable financial provision for her, seeking such financial provision as would be reasonable in all the circumstances for the court to award her, regardless of whether it would be required for her maintenance.
Spouses and civil partners enjoy a higher standard of provision under the 1975 Act and so are not necessarily limited to the “maintenance standard”, unlike all other claimants. That, perhaps, made the decision by the court to dismiss the claimant’s claim all the more surprising, at least to some.
Why the court dismissed the claim
Looking more closely at the court’s decision, it becomes clearer as to why it dismissed the wife’s claim.
First, the claimant benefitted, by survivorship, from various policies held by her late husband as well as the sale of their matrimonial home. At the time of trial, she held assets of approximately £1.66m. She also received income of around £1,800 per month made up of a pension and capital drawdown. However, her outgoings were in the region of £5,300 per month and she seemingly believed that they should be met from her income (to be supplemented by the deceased’s estate), without eating into her own capital.
The High Court disagreed. Dismissing the claim, the court concluded that the claimant’s own assets (the value of which in fact exceeded those which comprised her late husband’s estate) met her financial needs now and in the foreseeable future.
In coming to this decision, the court had to consider a number of factors, including:
- The divorce cross-checkThe claimant attempted to rely on the divorce cross-check, helpfully discussed and applied in Lilleyman v Lilleyman [2012] EWHC 821 (Ch), namely that consideration should be given to the provision a spouse would have received had the marriage ended in divorce rather than death. Though not to be taken as an ‘exact science’ nor a minimum or maximum award, the principles of sharing, needs and compensation should be considered and, in the case of a ‘sufficiently large’ estate the starting position is an equal split of the matrimonial assets.The claimant did not contest the fact that she already had a half share of the matrimonial assets. Instead, she argued that had her husband been alive and their divorce finalised, he would have provided her with a regular income. However, there was no evidence to suggest that this was the case and, as the claimant’s own assets had a higher value than that of the deceased’s estate, the divorce cross-check did not assist her case.
- Duxbury calculationsDuxbury calculations are designed to provide a party with a capital sum to meet a periodical income need based on actuarial tables and assumptions.Consideration was given to the use of Duxbury calculations insofar as how a lump sum may be calculated to represent the alleged future income needs of the claimant. The court concluded that the correct approach was to give the calculation ‘appropriate weight, but to understand that it does not of itself provide a definitive answer..’. In other words, they are to be taken as “a tool, not a rule”, though this is not a basis for setting them aside completely.
The trustees argued, using the Duxbury calculations, it could be shown that, if the claimant spent £750,000 on a property (which she intended to), the c.£900,000 remaining in her estate would provide for expenditure of some £100,000 per year for the rest of her life based on her life expectancy, more than sufficient for her claimed needs.
It was noted that Duxbury calculations can produce potentially “unfair” results i.e. where a young claimant leaves a short marriage or where a much older claimant leaves a very long marriage. In the latter case, the claimant may not necessarily be adequately provided for due to their old age and limited life expectancy, whereas in the former, the claimant would receive a disproportionately high award given their longer life expectancy.
- Removal of trusteesAs the claimant had brought a 1975 Act claim (which does not provide a basis for the removal of trustees), and despite the claimant’s concerns, it was decided that the court had no jurisdiction to remove the trustees.Further, it was determined that there was no correlation between the removal of the trustees and the claimant receiving reasonable financial provision, i.e. the identity of the trustees should, in theory, have no bearing on the income received by the claimant and, whoever the trustees may be, they would be equally entitled to terminate the claimant’s right to income.
Conclusion
This case is a useful reminder that the 1975 Act is not just an open invite for claimants to seek greater provision from an estate, even for those claiming as spouses or civil partners and that testamentary freedom remains a vital tenet of English and Welsh law.
From a claimant’s point of view, there are always two hurdles to overcome:
- is the claimant eligible to bring a claim; and
- if so, does the will or intestacy fail to make reasonable financial provision for them, with reference to the factors set out in section 3 and the potential provision allowed for them under the 1975 Act.
In this case it was clear that the claimant was eligible but that her own financial means meant that she unable to assert that the will failed to make reasonable financial provision for her.
