Solicitor’s Tip November 2025
Before an estate can be distributed, all of its debts must be paid.[1] Depending on the size of both the estate and its debts, it may be necessary, unfortunately, to exhaust testamentary gifts included in the will, either partially or in their entirety, to pay the estate’s creditors. Which gifts are used to pay the debt is typically determined in accordance with the common law order of abatement.[2] However, it is possible to draft a will to override this default order, making the payment of estate debts a salient issue to discuss during the estate planning process. This month’s Solicitor’s Tip reviews the law of abatement and addresses three ways a will can alter the common law order of abatement – by stating what assets should be used to cover debts first, by prioritizing certain gifts over others, or by empowering the estate trustee to choose which assets to use to pay debt.
Abatement & the Law in Ontario
Testamentary gifts may abate under a variety of circumstances, including when the estate lacks sufficient assets to satisfy all of the testator’s bequests.[3] An estate will also abate if the spouse of the testator elects to receive an equalization payment,[4] and that payment exceeds the residue of the estate.[5] Similarly, if a will directs the sale of an asset to pay multiple legacies but the sale proceeds are insufficient to pay them all in full, the legacies will abate.[6]
The order in which testamentary gifts are reduced under the common law “is contingent upon the determination of the nature of the bequests under the will.”[7] In Ontario, the estate residue is the first type of gift used to pay estate debts, including both residuary real and personal property, unless the will or codicil expresses a contrary intention.[8]
If there are still outstanding debts after the estate residue has been exhausted, additional testamentary gifts will abate under the common law in a default order. First, general legacies, including pecuniary legacies, will abate pro rata. Second, if the estate still owes debts, demonstrative legacies will abate rateably. Third, specific bequests and legacies of personalty, and fourth, specific devises of real property, also abate rateably.[9] Gifts of real property abate last “because of the general rule that personalty is primarily liable for the payment of debts.”[10]
Using a Will to Alter the Order of Abatement
The Supreme Court of Canada has confirmed that, if a testator foresees the possibility of a deficiency and provides for it in their will, “there can be no doubt … his express intention governs” rather than the common law order of abatement.[11] There are at least three drafting strategies that can be utilized to override the abatement rules:
- Prioritize the payment of certain legacies: A client can protect a gift or gifts from abating under the common law by expressing a clear intention that those gifts are to be given priority in the event of a deficiency.[12] For example, the common law order of abatement did not apply in Re West Estate, as the testator’s will clearly articulated the order in which the estate legacies were to be paid.[13]
It is also possible to use a will to prioritize one gift over other gifts of the same nature. For example, in Mickler v Larson-Shorten, a general legacy of $10,000 left to the testator’s wife took priority over a general legacy left to his daughter, displacing the usual abatement rules.[14] The wife’s gift took priority because the will was drafted so that the daughter’s gift would not vest unless the wife received her legacy.
This strategy can also be applied to estate plans with multiple wills – for example, the testator may instruct that debts be paid solely using assets governed by one will, thereby exempting assets governed by the other will or wills.
- Create a fund for paying debts: The abatement rules will also not apply if a will directs that a portion of the estate be used to pay its debts, so long as it is sufficient to pay the debts in full. For example, the will could direct that a life insurance policy be used for this purpose,[15] or direct the sale of certain assets to create a fund for paying estate debts, if necessary.[16]
- Empower the estate trustee to determine which assets to sell to pay estate debts: A testator may also authorize the estate trustee to choose which assets to sell in order to satisfy the estate’s debts. For estate plans that utilize multiple wills, “it will be important for the [estate] trustees to ensure their actions cannot be construed as favouring one or more beneficiaries over any others,” particularly if each will names different residuary beneficiaries.[17] As a general rule, trustees should not give preferential treatment to any beneficiary or group of beneficiaries, and instead treat all beneficiaries impartially.
Conclusion
When counsel is retained to prepare a will, it is important to ensure that the client understands that all estate debts must be paid before the estate can be distributed, and the order in which testamentary gifts will be used to pay the estate’s debts under the common law of abatement. Depending on the client’s instructions, there are three ways for a will to override the common law order of abatement – the will may either prioritize a particular gift or gifts, direct that debts be paid from a particular fund, or empower the estate trustee to choose which estate assets to use to satisfy the estate’s debts.
[1] See Ian M. Hull & Suzana Popovic-Montag, Feeney’s Canadian Law of Wills, 4th ed (Toronto: LexisNexis, 2000) (loose-leaf) at § 8.49 [Feeney’s].
[2] Albert H. Oosterhoff et al, Oosterhoff on Wills, 9th ed (Toronto: Thomson Reuters, 2021) at 575 [Oosterhoff].
[3] Ibid.See also Hale v Stewart,2025 ONSC 2275 [Hale] at para 61. In this case, estate assets had to be sold after the death of a life tenant resulted in an unexpected tax liability.
[4] Family Law Act,RSO 1990, c F.3, s 5(2).
[5] See Anne Armstrong, Estate Administration: A Solicitor’s Reference Manual (Toronto: Thomson Reuters, 1984) (loose-leaf) [Armstrong] at § 3:94. Also see the Family Law Act, ibid, s 6(12) (equalization payment has priority over gifts made to other beneficiaries under the will); Leith v Eccles, 2024 ONSC 4769.
[6] See Lindsay v Waldbrook, [1897] OJ No 67 (CA).
[7] Mickler v. Larson-Shorten, 2000 SKQB 426 [Mickler]at para 10.
[8] See the Estate Administration Act, RSO 1990, c E.22, s 5 (property is applicable rateably to the payment of “debts, funeral and testamentary expenses and the cost and expenses of administration”).
[9] Oosterhoff, supra note 2 at 575.
[10] Feeney’s, supra note 1 at § 8.53. See also Mickler, supra note 7 at para 10. For a case where devises of real property were subject to abatement, despite the general rule, see Hale, supra note 3. The court’s order to sell the real property also was not stayed pending appeal: see Stewart Estate v Stewart, 2025 ONCA 575.
Even a life interest in real property can abate: see Daye v Daye Estate, 2023 NSSC 305.
[11] See In Re West Estate, 1942 CanLII 372 (SCC), [1942] SCR 120 [West]at 125, quoting Lord Blackburn’s decision in Robertson v Broadbent (1883), 8 App Cas 812 at 818.
[12] Armstrong, supra note 5 at § 3:113.
[13] West, supra note 11.
[14] Mickler, supra note 7. See also Feeney’s, supra note 1 at § 8.54 (the order of abatement is not displaced by words such as ”to be paid immediately after my decease out of the first moneys belonging to me”).
[15] The estate would also have to be named as the beneficiary of the policy.
[16] See, for example, Re Walsh; Grayson et al v. Walsh et al, 1925 CanLII 830 (SK KB) (testator directed sale of both real and personal estate to create mixed fund for payment of debts and legacies).
[17] Clare A. Sullivan, “Administration of Multiple Will Estates” in Armstrong, supra note 5 at § B:7. See also Lindsay A. Histrop, “Multiple Wills: Their Use and Drafting Issues” in Lindsay A. Histrop, Estate Planning Precedents: A Solicitor’s Manual (Toronto: Thomson Reuters, 1995) (loose-leaf) at § B:7.