Last week’s article considered the inheritance tax implications of using different property trust structures for an unmarried couple. Tax efficiency is, however, only one aspect of effective estate planning. This article examines life interest trusts and Inheritance Act claims, and considers how a trust can provide suitable security for a surviving partner whilst preserving assets for the testator’s chosen beneficiaries.
This case study concerns a client who owned her home in her sole name and lived there with her unmarried partner. She wished her partner to be able to remain in the property after her death but ultimately wanted the property to pass to her relatives.
As the couple also intended to marry, the planning needed to consider how marriage would affect the partner’s rights under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”).
The Client’s Objectives
The client had no children and owned the property outright. Her partner lived in the property with her. They were currently unmarried but intended to marry.
Her objectives were to:
- allow her partner to live in the property for the remainder of his life;
- retain control over who would ultimately inherit the property;
- protect the capital value of the property for her relatives; and
- reduce the likelihood of a successful claim against her estate.
A life interest trust was a potential solution.
Under this arrangement, the partner would have a legally enforceable right to occupy the property during his lifetime and entitlement to income. When that right ended, usually on death, permanent vacation of the property or another event specified in the will, the property would pass to the client’s family.
The main question was whether this would amount to reasonable financial provision for the partner, particularly if the couple married.
Can a Partner Claim Under the 1975 Act?
The 1975 Act allows certain people to apply to the court if a deceased person’s will, or the intestacy rules, fails to make reasonable financial provision for them.
An unmarried partner may qualify to claim if, throughout the two years immediately before the deceased’s death, they lived with the deceased as though they were married or civil partners. A person who was being maintained wholly or partly by the deceased may also qualify under a separate category.
For an eligible unmarried partner, reasonable financial provision is limited to what is reasonable for the applicant to receive for their maintenance.
A life interest or right to occupy can therefore represent substantial financial provision. It gives the survivor housing security and may remove or significantly reduce the need to meet accommodation costs.
Nevertheless, it does not prevent a claim. The partner could still argue that the terms of the trust were insufficient particularly if the benefit under the trust is limited.
How Marriage Changes the Position
The position becomes materially different if the couple marry.
A surviving spouse is not restricted to provision required for maintenance. Instead, the court may award such financial provision as is reasonable in all the circumstances, whether or not it is needed for maintenance.
This is a broader and likely more generous standard than applies to an unmarried partner.
When considering a spouse’s claim, the court may also consider what the applicant might reasonably have received if the marriage had ended through divorce rather than death. This does not determine the outcome, but it may assist the court in assessing whether the will made reasonable provision.
For example, suppose the property is worth £600,000 and represents most of the client’s estate. The will allows her husband to live there for life but gives him no right to capital or income and no ability to move.
If he has limited savings and cannot afford the property’s upkeep, the court may conclude that occupation alone is inadequate. By contrast, the arrangement may be reasonable if he has substantial resources and access to other suitable assets.
Marriage also has an important effect on the will itself. Under section 18 of the Wills Act 1837, marriage generally revokes an existing will unless it was made in contemplation of that specific marriage. The will should therefore either be prepared expressly in contemplation of the intended marriage.
What Factors Would the Court Consider?
Section 3 of the 1975 Act requires the court to consider a range of circumstances, including:
- the applicant’s current and foreseeable financial resources and needs;
- the resources and needs of the estate’s other beneficiaries;
- the deceased’s obligations and responsibilities towards the applicant and beneficiaries;
- the size and nature of the estate;
- any physical or mental disability affecting the applicant or a beneficiary; and
- any other relevant matter, including conduct where appropriate.
For a spouse or partner, the court may also consider the length of the relationship, the parties’ respective contributions and the standard of living enjoyed during the relationship.
The outcome is therefore highly fact-sensitive. There is no rule that a life interest will always be sufficient or always inadequate.
Life Interest Trusts and Inheritance Act Claims: What Do the Cases Show?
Several decisions illustrate how trust-based provision may be assessed.
In Ramus v Holt [2022] EWHC 2309 (Ch), a widow’s claim was unsuccessful. The court concluded that the trust arrangements, considered alongside her own resources, provided reasonable financial provision.
By contrast, Cowan v Foreman [2019] EWCA Civ 1336 demonstrates that trust-based provision may not always be adequate, particularly where the surviving spouse is dependent on trustees exercising discretion in their favour. A purely discretionary benefit offers less security than an enforceable life interest.
In Lilleyman v Lilleyman [2012] EWHC 821 (Ch), the provision made for a widow was found to be insufficient in the circumstances of a blended family. The case illustrates the need to balance the survivor’s position against the deceased’s wish to preserve assets for other family members.
In these cases, factors such as the spouse’s needs, standard of living, age, relationship history and the size of the estate are all relevant to whether a life interest or right to occupy will be considered adequate.
Reducing the Risk of a Dispute
Careful drafting can make a life interest trust more effective. The will should address:
- whether the survivor may require the trustees to sell and purchase a replacement property;
- whether occupation ends on remarriage, cohabitation or permanent vacation;
- whether the survivor may receive income or capital in addition to occupation.
A letter of wishes can also explain why the client chose the arrangement and how she intended it to operate. Although not legally binding, a clear letter may provide valuable evidence if the will is later challenged.
A forfeiture or “no-contest” clause could provide that the partner loses his benefit if he makes a claim against the estate. Such a clause cannot prevent proceedings, and its effectiveness will depend on the circumstances. It may however introduce litigation risk for a claimant who could lose an existing life interest if the claim fails.
Conclusion
A life interest trust may provide substantial financial provision for a surviving partner, but it will not automatically prevent a claim under the 1975 Act.
The interaction between life interest trusts and Inheritance Act claims will always depend on the circumstances. A well-drafted will and supporting letter of wishes can place the estate in a stronger position if a claim is later brought.
If you have subscribed to our Quiz Membership 2026, please find this article’s quiz here. You must be signed into the partner area of our website to access this.
This article is provided for general information only and does not constitute legal advice. Any advice, wording or clauses referred to are illustrative and should not be relied upon as precedent without full consideration of the client’s circumstances, the will as a whole, and the law in force at the relevant time.
