What Happens If the Estate Does Not Have Enough Money to Pay All Beneficiaries in BC?
This answer covers the law of British Columbia.
When an estate cannot pay everything, gifts are reduced in a set order, and some beneficiaries may receive less than the will says, or nothing. WESA s. 50 sets the rules for abatement, and property is reduced in this order: property specifically charged with a debt or left on trust to pay a debt; then intestate property and the residue; then general, demonstrative and pecuniary legacies; then specific legacies; and last, property over which the will-maker had a general power of appointment.
If the estate is insolvent, WESA s. 170(1) applies. Subject to secured creditors, the proceeds go first to reasonable funeral and administration expenses, then the personal representative's compensation and legal expenses of administration, ahead of other listed claims, with all other accepted claims paid rateably. A beneficiary left property with a purchase money security interest is primarily liable for that secured debt.
A personal representative who publishes a Gazette notice giving creditors at least 30 days may distribute afterward, counting only claims they know of, and is not liable for claims not presented in time, but a creditor can still recover estate assets from whoever received them. What a beneficiary receives depends on the will and the debts, so a lawyer can confirm.
Key takeaways
- If the estate cannot pay all debts and gifts, WESA s. 50(5) reduces property in a set order, starting with property specifically charged with a debt.
- Intestate property and the residue are reduced before general, demonstrative and pecuniary legacies, and specific legacies are reduced after those.
- In an insolvent estate, and subject to secured creditors, reasonable funeral and administration expenses are paid first.
- A beneficiary left property subject to a purchase money security interest is primarily liable for that secured debt.