In Leith v Eccles, 2024 ONSC 4769, the applicant, Linda, brought a motion to receive an equalization payment from the estate of her late husband, William (the “Estate”). Linda wanted to apply the equalization payment towards the purchase of the matrimonial home she had lived in with William for many years, but which now belonged to the Estate. While Linda was entitled to receive an equalization payment from the Estate, the Court ultimately found that the matrimonial home had to be sold in order to determine the quantum of Linda’s equalization payment.

William died on December 29, 2021 with a last will and testament (the “Will”). William owned bank accounts, a pension, RRSP accounts, and six properties (including the matrimonial home). Under the Will, Linda was to receive only ½ of the amounts in William’s bank accounts, pension, and RRSP. Meanwhile, the Will bequeathed the properties to William’s children, and distributed the remaining balance of the Estate among the children in equal shares. In short, Linda was to receive only a small fraction of the Estate under the Will. Unsurprisingly, the Court found that William had “not otherwise provided for [Linda] in his estate.”

The Court found that Linda was entitled to make a claim for equalization of net family property in lieu of receiving the gifts specified for her under the Will, pursuant to s. 5(2) of the Family Law Act, RSO 1990, c F.3 (the “FLA”). The Court also noted that Linda’s claim for equalization would take priority over the specific bequests to William’s children under the Will. However, it was unclear exactly how much Linda would be entitled to. While the parties estimated that Linda would be entitled to receive an equalization payment in the range of $2,100,000 to $2,400,000, the exact quantum was ultimately contingent on the actual sale price of the properties.

As discussed, Linda wanted to use her equalization payment to purchase the matrimonial home from the Estate. Linda argued that the quantum of her equalization payment could be determined without selling the matrimonial home. Linda referred to ss. 7 (1) and 9(1) of the FLA, which together provide that a court may, in satisfaction of an equalization payment, order that “property be transferred to or in trust for or vested in a spouse, whether absolutely, for life or for a term of years.” Linda also referred to the court’s broad and general power to grant a vesting order under s. 100 of the Courts of Justice Act, RSO 1990, c C43.

In dismissing Linda’s argument, the Court referred to the general rule for granting a vesting order in the context of equalization under the FLA:

“The onus is on the party seeking such an order, and as a general rule the court’s discretion will only be exercised in favour of a s. 9(1) order where it is established  – based on the targeted spouse’s previous actions and reasonably anticipated future behaviour – that the equalization payment order granted will not likely be complied with in the absence of additional, more intrusive provisions.”

In other words, absent any concern that an equalization payment will not be honoured, a court should not grant an order vesting property in (i.e., transferring property to) a surviving spouse. In Leith v Eccles, there was no such concern. Once all the properties (including the matrimonial home) were sold, there would be sufficient funds for the Estate to make good on its obligation to equalize Linda.

In addition, the Court placed significant weight on William’s testamentary intentions. Whatever his reasons (and no matter how harsh they appeared), William specifically chose not to bequeath the matrimonial home (or any other real property) to Linda. William’s testamentary decision in this respect was a “significant factor that [the court] must consider when determining the manner in which [Linda] will receive her equalization payment from the Estate.”

In the end, the Court ordered the sale of the properties, including the matrimonial home. Once the properties were sold, the Estate would have sufficient assets to pay the full equalization amount owed to Linda, without the need to transfer the matrimonial home to her in satisfaction of her equalization payment. While this meant that Linda would not be able to purchase or receive the matrimonial home, it also meant that William’s children would not receive the specific properties that had been bequeathed to them under the Will.

Leith v Eccles serves as a useful reminder of the importance of careful testamentary planning, particularly where the testator has a spouse and children. Poor testamentary planning can lead to unintended and undesirable results for all beneficiaries.