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What Does Per Stirpes And Per Capita Mean For Beneficiary Distributions In Estate Planning?

What Does Per Stirpes And Per Capita Mean For Beneficiary Distributions In Estate Planning?

Estate planning is a stressful process, but it is a necessary life step. When you start working with an attorney for estate planning, you will come across the terms 'per stirpes' and 'per capita'. Both these terms are default indicators of a deceased person's estate distribution plan to his/her heirs or beneficiaries. Like many aspects of estate planning, it is crucial to understand these terms so that you can make sure that you take the right decision in distributing your estate between your loved ones even after you are gone.

What does per stirpes mean?

Per stirpes is derived from a Latin term that literally means "by the roots", which also means "by class" or "by representation." In estate planning, it refers to a class of beneficiaries. When an estate is distributed per stirpes, each recipient in that particular class or group will receive an equal share. Also, when a member who is entitled to an amount that you have left predeceases you, the descendants of the deceased person will receive his share of his assets evenly, i.e. based on representation.

If you choose to distribute your estate per stirpes, you don't have to worry about the distribution. When any of your descendants pass away, these distributions will be divided equally among the beneficiaries (i.e. his legal children), and the same pattern will continue unless you wish to change the distribution pattern.

For example, imagine the following scenario:

Case 1 - Andy has three children - Brenda, Chris, and Zoe. Andy passes away, and all children are still living. As her three closest beneficiaries (her children), Brenda, Chris, and Zoe will each receive 1/3 of her estate.

Case 2 - Andy passes away, and Brenda also passed away the year before. However, Brenda had no children. In this case, both Chris and Zoe will inherit one-half, i.e. 1/2 of Andy's estate, which means that Brenda's share will be equally distributed among the other two descendants. In this case, Chris and Zoe.

Case 3 - Now assume Andy passes away and Brenda also passes away, leaving behind her two children - Mary and Victor (Andy's grandchildren). Under a per stirpes distribution plan, the estate will be distributed with -

  • 1/3 share to Chris
  • 1/3 share to Zoe
  • 1/6 share to Mary
  • 1/6 share to Victor

Per stirpes distribution is also known as "by right of representation" because the descendants of a deceased heir will also inherit that heir's share equally amongst them.

What does per capita mean?

Per Capita is a Latin term which literally means "by the head" or "by total headcount" or "by a total number of individuals." Under a per capita distribution, all the living member of a group, including your children and others whom you have identified, will receive an equal share of your property. However, if any member of the defined group predeceases you, the property is then further divided between the living members rather than the deceased member's share going to his/her children.

Here is an example that will help you understand the 'per capita' distribution plan:

Let's assume the same scenario from above, where Andy has left the estate documents stating "to my children, per capita."

Case 1 - In this case, all the living members, i.e., Brenda, Chris, Zoe, Mary, and Victor will each receive a 1/5 share of the estate.

Case 2 - Assume that Brenda passed away. Chris, Zoe, Mary, and Victor will each receive one-third (1/3) share of the estate.

Case 3 - If both Brenda and Victor both were deceased, Chris, Zoe, and Mary will each receive 1/3 share of the estate.

Which is a better distribution plan?

Every family dynamic is different, and often it is difficult to predict the possible situations that may arise or change between family members and loved ones when you pass away. In the legal arena, per stirpes is the most commonly used method for estate or asset distribution than per capita.

However, if you think that per capita distribution is the best-suited approach for your family then make sure to discuss the cost of generation-skipping with your estate planning attorney. Each of these choices takes a lot of thought; therefore, it is essential to consider your family situation and choose the right distribution plan to pass on your legacy to your heirs.

A Final Thought

Estate planning is not just about writing up a will, but involves a lot of thinking and discussions. However, if you are still confused about which distribution plan to choose, as well as its long-term consequences on your descendants, it is crucial that you consider consulting an estate planning attorney to discuss how you may distribute your estate to your heirs.

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