Part one of this series touched on the three different types of legacies.  You can read that article here.

We had mentioned that this was going to be a two-part series.  However, the rabbit-hole of estate administration never ends, and we find ourselves with more information to share than originally anticipated.  Welcome back to a multi-part series!

We’d like to draw your attention to section 50 of the Wills and Estates Succession Act 2014 (WESA).

Section 50 sets out:

Rules if assets are not sufficient

50   (1) This section is subject to a contrary intention appearing in a will.

(2) If a will-maker’s estate is not sufficient to satisfy all debts and gifts, the debts and gifts must be satisfied or reduced in accordance with this section.

(3) Land charged by the will-maker with payment of debts or pecuniary gifts, or both, is primarily liable for the debts and gifts, despite a failure of the will-maker to expressly exonerate the personal property.

(4) Land and personal property must be reduced together.

(5) Subject to subsection (3), assets are reduced in the following order:

(a) property specifically charged with a debt or left on trust to pay a debt;

(b) property distributed as an intestate estate and residue;

(c) general, demonstrative and pecuniary legacies;

(d) specific legacies;

(e) property over which the will-maker had a general power of appointment.

If you’ve read part one, you somewhat understand what a few of the above noted terms mean.  But what is a general power of appointment (section 50(e))?  A power of appointment is the authority given by person A to person B that allows them to appoint the property in favour of another person (person C) or in favour of themselves.  Though there are three types of powers, we will only focus on the general power of appointment as per the above legislation. 

Let’s break it down:

Adam (the donor) owns Marshy Manor. Adam appoints Barb (the donee/appointor) to have the power to appoint anyone to receive Marshy Manor when Adam dies (subject of course to small exceptions like if that person is a fiduciary. Law is complicated).  The person who would receive Marshy Manor (person C) is known as the object of the power or the appointee.

Note, Barb does not own the property as donee. Rather, Adam is the owner and the person who Barb decides will receive the property may become the owner.

Why is this important to understand?  As an executor, you have a duty to wrap up the assets and liabilities of the estate pursuant to the rules of WESA.  Section 50 of WESA establishes a hierarchy of gifts which helps Executors/Administrators understand how to distribute the deceased’s estate when the assets of the estate are insufficient to pay out the debts or the gifts in full. 

Take a couple of weeks to mull over this information and come back to part three where we help to explain how section 50 of WESA applies in real life, not just to Marshy Manor. 

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of wills and estates at the following:

Jane Otterstrom: jane@touchstone.law