Last week, I wrote about the significance of the differences among general, demonstrative and specific gifts in a will if there are insufficient funds in an estate to pay out all of those gifts. When there are insufficient funds to pay all of the gifts, then the amount paid on the gifts is reduced, and they are said to “abate.” But as I wrote in my post last week, as well as in a previous post on abatement, the not all kinds of gifts are treated equally, and some abate before others.
When the new Wills, Estates and Succession Act comes into effect in
on March 31, 2014, the priorities will change.
As set out in Celantano Estate v. Ross, 2014 BCSC 27, which I quoted in my most recent post, the order of abatement before the new legislation comes into effect was:
1) residuary personality;
2) residuary real property;
3) general legacies, including pecuniary legacies from residue;
4) demonstrative legacies;
5) specific bequests of personality;
6) specific devices of real property.
Under section 50 of the Wills, Estates and Succession Act, the order of abatement will be as follows:
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.
A couple of significant changes stand out.
Under the common law rules, land was given priority over other assets, so that the last gift to abate was a specific gift of land. Under the new rules, gifts of land and gifts of other assets are treated equally.