Per Stirpes vs Per Capita in Estate Planning: What’s the Difference?
Estate planning can be tricky, especially when it comes to learning about per stirpes vs per capita. What’s the difference you may ask?
Read further for all the details.
Introduction
Estate planning is so important for the future of those you leave behind. Nobody wants to plan for their death, but it is an important thing to do so that you can make sure everyone is taken care of. And that means it is crucial that you have a full understanding of how it all works – and what the terminology means.
If you have a last will and testament in place or you have created a revocable trust as part of your estate planning, then you have likely designated at least one beneficiary. The way in which the assets stated within these documents get passed down to your heirs will depend on whether they are going per stirpes or per capita.
This will almost always be stated within the will or trust so it is a good idea to have an understanding of what they each mean.
Per Stirpes: An Explanation
The old legal term per stirpes means that should the stated beneficiary die before the person who made the will or trust, that beneficiary’s share would go to his or her heirs. In Latin, the phrase means “by branch.” So, in other words, the share goes to that beneficiary or that beneficiary’s heirs – straight down the branches of a family tree. For instance, a mother, her children, her grandchildren, her great-grandchildren, etc.
Per stirpes is the most commonly used in estate planning. It should be noted that spouses are not included or taken into consideration with per stirpes because they are only part of that family tree by marriage.
Per Capita: An Explanation
Per capita is a bit different than per stirpes. Rather than the assets being distributed to a beneficiary’s heir “by branch,” it is distributed equally among the remaining descendants of the same generation. In fact, in Latin, per capita, means “by the heads.” It is also sometimes referred to as “share and share alike.” This means that if the beneficiary is deceased, his or her portion of the assets will be equally divided among the descendants in the closest generation. They do not pass on to beneficiaries who are still living.
Per Stirpes vs Per Capita: Examples
Getting beneficiaries and heirs and the like right between per stirpes and per capita can be a bit confusing. Sometimes it helps to have examples in order to grasp a better understanding. After all, when it comes to your assets and the future of your loved ones, you want to make sure you make the right decision when writing out your will or trust.
- Examples of Per Stirpes
For the sake of the examples, we are going to say that you have three kids: Mary, John, and Cindy. Mary has two kids, Jim and Billy. There are no other descendants.
If your will or trust states that, upon your death, your assets are to be distributed to your, “then living descendants, per stirpes,” here’s what will happen.
Ex. 1: If Mary, John, and Cindy are all still alive, then they each receive ⅓ share of your estate. The two kids, Jim and Billy receive nothing.
Ex. 2: If Mary has died before you, then John and Cindy will each receive their ⅓ share of your estate. The remaining ⅓ that belonged to Mary would then be split between her kids, Jim and Billy. Each would get ⅙ th of the estate.
Ex. 3: If John has died before you, then Mary and Cindy each receive ½ of your estate. Jim and Billy receive nothing. Since John didn’t have any descendants, his share will be given to the other two siblings.
- Examples of Per Capita
For the sake of these examples, we will stick to the same family of Mary, John, and Cindy used above. If your will or trust states that your assets are to be distributed to your, “then living descendants, per capita,” this is what that may look like.
Ex. 1: If Mary, John, Cindy, as well as Jim and Billy are all still alive upon your death, they will each get ⅕ share of your assets.
Ex. 2: If Mary has died before you, then John, Cindy, Jim, and Billy each receive ¼ share of your assets.
Ex. 3: If Mary and Jim have died before you, then John, Cindy, and Billy will all receive ⅓ share of your assets.
Per Stirpes vs Per Capita: Which Should You Choose?
It is important that you pay close attention to what you want to happen to your assets when you die. There are various scenarios – especially if additional children are born or beneficiaries die before you do. If possible, be sure to update your will or trust regularly to account for these changes.
As for which option is the best for you, it is most definitely a personal choice. Per capita means that even if one of the beneficiaries dies before you, your assets will be equally distributed between the rest. But it also means that any of the decedent’s kids won’t receive their share. With per stirpes, however, if one beneficiary dies, then his or her kids will receive the share. This is a great way to ensure that the descendants of your original beneficiary are protected.
Take a look at your family dynamics and make the best decision. Be thorough and clear with your wishes so that there is no question when that time comes. Even if you choose per capita or per stirpes, also make your terms very clear so that it is understood without any hesitation.
How an Attorney Can Help
Estate planning can be very tricky. It is one of those things that you just have to get right. One small mistake could have an unfortunate impact on your beneficiaries. Hiring an attorney to help you walk through the process is a great choice.
Having an experienced professional on your side means that any questions you need to be answered or terminology you don’t understand can be clarified before you make your final decisions. Be safe and protect your loved ones by hiring an attorney.
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