We’ve previously written on a few of the estate distribution requirements set out in the Wills and Estates Succession Act 2014 (WESA) so be sure to cruise through our past blogs to refresh your memory!

As you may know, your Executor is required to pay out all debts and liabilities of your estate before any distribution to beneficiaries can be made.  This includes such things as funeral expenses and administration expenses.  But what happens if you’ve made gifts in your will that your estate cannot afford to pay out in full?  The doctrine of abatement concerns just that – it provides for the order in which your testamentary gifts are reduced if the assets of your estate are insufficient to pay the gifts in full.

Section 50(4) of WESA provides that both land and personal property are reduced together.  Section 50(5), however, establishes a hierarchy of gifts to assist in the “reduction” process. 

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.

What does this mean? Any property you may own will be liquidated to pay out your liabilities, first.  If the sale of the property is not sufficient to pay out the debts, your Executor will look to using the residue of your estate to pay out the debts.  From there, your general and demonstrative legacies will be used. This is why it is important to understand the legacy types, as you may wish to ensure certain gifts are better guarded from abatement.

If there are gifts you’d prefer to be paid ahead of others (and not subject to the hierarchy of abatement above), we are able to include provisions to ensure just that!  Contact us to discuss your estate planning needs.

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