Robert McCorkill had willed the items to the National Alliance, based in West Virginia, before he died in Saint John in 2004.
But a New Brunswick Court of Queen's Bench judge ruled on Thursday in favour of McCorkill's estranged sister, Isabelle Rose McCorkill, who had challenged the will.
Judge William Grant said the "hate propaganda" of the National Alliance is both illegal in Canada and contrary to public policy, and voided the will.
“This was a strong statement indicating that it is against Canadian public policy to bequeath money to organizations that spread hate," the Centre for Israel and Jewish Affairs said in a statement on Friday.
The group, which serves as the advocacy arm of the Jewish Federations of Canada, had also been an intervener in the case.
"Today, we are fortunate that the National Alliance is a severely diminished group barely holding onto its shrinking membership. The threat was that an injection of about a quarter million dollars might have breathed new life into this dying organization," the statement said.
McCorkill's collection includes Greek and Roman coins that are thousands of years old, an ancient Iranian sword, and more, according to an appraiser's report from August 2010.
His sister, who lives in Ottawa, was not interested in the valuable collection, according to her Moncton-based lawyer, Marc-Antoine Chiasson. But when she learned it had been willed to the National Alliance, she felt compelled to step in, Chiasson had said.
She obtained a court injunction last July, which temporarily blocked any distribution of the estate or transfer of items out of New Brunswick. The case was heard in September and the judge had reserved decision.
"In my view, engaging in activity which is prohibited by Parliament through the enactment of the Criminal Code of Canada falls squarely within the rubric of public policy violation," Grant stated in his 44-page decision, released on Thursday.
"In addition, as the applicant has pointed out, the NA's various communications and activities contravene the values set out in the Charter of Rights and Freedoms, provincial human rights legislation, as well as the International Conventions, which Canada has signed, all of which promote equality and dignity of the person while prohibiting discrimination based on various grounds, including race and ethnic origin," he said.
The League for Human Rights of B'nai B'rith Canada, the Canadian Association for Free Expression, and the government of New Brunswick had also intervened in the case.