How do you deal with a multi-month long advance booking when you get a last minute cancellation as relatives or friends suddenly become available?

They way to combat this is to set your cancellation policy to strict. It defaults to moderate which gives the client until noon the day before the booking to cancel with a full refund. This is pretty unfair especially in the situation you have mentioned. Strict lets them cancel up to a week before the booking starts for a refund. Another thing to consider is that the client needs to cancel the booking if it is their choice, not you. If you cancel for them, the client will not be charged.