The Ontario Court of Appeal has upheld a lower court ruling, thwarting a man’s attempt to carry out an estate plan to keep his assets away from his wife.

At issue in the case is whether a husband who learns that he is terminally ill, is entitled to dispose of his property by gifts to his grown children in order to frustrate the equalization of his net family property by his wife upon his death. The trial judge held that he could not, and set aside the gifts to the children. They appealed. Today the Ontario Court of Appeal dismissed the appeal.

The case involves Harry and Sarah Stone, whose marriage was the second for each of them following the deaths of their first spouses. They each had children from their first marriages. They were married for over 24 years, until Mr. Stone’s death in 1995.

Stone had an estate plan, the purpose of which was that ultimately all of his assets would belong to his two children. During his marriage Stone had transferred some properties and shares to his children, but he maintained control over the assets through a voting trust and through the retention of the last $1.9 million. He did not want any of his assets to go to Mrs. Stone’s children, and to that end, nothing was held in her name.

In March 1995, Stone was diagnosed with lung cancer and told that he only had weeks or months to live. He then told his doctor that his children would be receiving everything from him before his will, and that he expected that some day there would be litigation over what he did.

Stone retained a lawyer and prepared a will leaving Mrs. Stone $250,000 together with a life tenancy in the matrimonial home. All of Stone’s business assets were transferred to his children. Stone died on July 21, 1995, leaving virtually nothing in his estate. Mrs. Stone elected not to take her legacy under the will but instead to take her entitlement to equalization. She also proceeded with a successful motion for an order setting aside the transfer of the matrimonial home.

The trial judge held that the asset transfers were illegal and he ordered that those assets therefore be returned to the estate, and that an equalization payment of $851,937.74 be made to Mrs. Stone. He also ordered costs in her favour on a solicitor and client basis. The appeals court upheld this judgement, dismissing both the appeal and a cross-appeal, both with costs.