Exposition (Initial Situation)
In Maud We Trust Fund
Meet Kate Croy and Merton Densher. They want to get married. The problem is that Kate's rich benefactress, Maud Lowder, will totally cut her off if she marries a poor nobody like Merton. Maud wants to marry Kate to a certain Lord Mark. His personality is unimportant: he's a lord. 'Nuff said.
This means that Kate and Merton have to meet with one another secretly, trying to think of a plan for how they can be together. Just when they make the decision to commit to one another by getting engaged, Merton is called away to New York on business. It's a total buzzkill.
Rising Action (Conflict, Complication)
Well into the book, we meet the young, beautiful, and extremely rich Milly Theale and her companion Susan. They are travelling together through Europe. Milly has met Merton in New York and developed a bit of a crush on him. After she goes to London to see him, she finds out that she is very ill: the kind of ill you don't get better from. She meets up with Kate Croy and Aunt Maud and they become buddies.
When Kate Croy finds out about Milly's illness, she waits until Merton is back from New York, and then encourages him to seduce Milly and marry her. That way, when Milly dies, he'll inherit the money and be rich enough to marry Kate. Perhaps the biggest conflict arises within Merton, whose moral conscience makes it very tough for him to go through with this plan. He's a good dude asked to commit a seriously bad act. What's a lad to do?
Climax (Crisis, Turning Point)
Lord Mark's Revenge
The whole gang goes off to Venice to hang out with Milly while she sees Italy before she dies. It's both kind of uplifting and a total downer. Lord Mark proposes to Milly, but it's obvious that he knows about her illness and wants to get in her bank vault as well as her pants. Exit Lord Mark, back to England. Exit Kate and Maud, back to England so Merton can woo Milly, Lord Mark-style.
Merton doesn't really do such a good job of wooing Milly. Then Lord Mark shows up and tells Milly about Merton's secret engagement to Kate. Ka-blam! If we had to pinpoint the climax of this slow-burn of a novel, this would be it, guys. This is the point at which we can say, in a booming, ominous voice: "And things were never the same again…"
The news comes as such a shock to Milly that it sends her into a death spiral that she never recovers from. Yikes. Her friend Susan goes to Merton and begs for him to deny Lord Mark's story to Milly in order to save her life. But Merton just can't stomach lying to a dying girl. The guy has the George Washington complex and cannot tell a lie. He leaves for England and receives word soon after that Milly has died. Meanwhile, the rest of us have probably been thinking, "Dude, just lie to her already. She'd die happier."
After Merton has heard the news about Milly's death, he retreats to his home in London and doesn't meet with anyone—including Kate Croy—for the next little while. Then on Christmas Eve, he receives a letter that is clearly in Milly's handwriting. Figuring that she must have written it before she died, Merton takes the letter to Kate and asks her to open it for him. Kate opens the letter and tells him that Milly Theale has left him the better part of her fortune, even though she knew he was trying to deceive her in order to marry Kate. As you can imagine, Merton feels like a scuzzbag, and the idea of inheriting Milly's money makes him feel even worse.
The Merton Ultimatum
After he finds out about the money he's inherited, Merton decides that he needs to know whether Kate truly loves him for who he is. He gives her an ultimatum saying that she can either have his money or him. If she marries him, he'll turn down Milly's money. If she rejects him, he'll give all the money to her. Of course, most of us want true love to triumph here.
But Kate gives him the answer, "We will never be the same as we were," which is pretty ambiguous and doesn't tell us how things are going to play out for the couple. For the "resolution" of a novel, we don't get a whole lot of… resolution. But Henry James wasn't a big fan of closure. He was, however, a huge fan of open endings that torment his readers for years.