“Per stirpes” means taking “by representation.” In the estate planning world, this means that if the beneficiaries are to share in a distribution “per stirpes,” then the living member in the class of beneficiaries who is closest in relationship to the person making the distribution will receive an equal share.
However, if a member in the class of beneficiaries who is closest in relationship to the person making the distribution is deceased and survived by any descendants, then that deceased beneficiary’s descendants will take “by representation” what their deceased parent would have taken.
The easiest way to explain the concept is by a few examples. Let’s assume the following:
- You have two children, Mark and Eve
- Eve has two children, Yvonne and Julie
- Mark has no descendants
If your Last Will and Testament or Revocable Living Trust states that your property is to be distributed to your then living descendants, “per stirpes,” here’s what happens in different scenarios:
- Assume that Mark and Eve have survived you:
- Mark and Eve each receive half
- Yvonne and Julie receive nothing
- Assume that Eve has predeceased you and Mark has survived you:
- Mark has half the estate
- Yvonne and Julie share the other half of the estate, each get ¼, because they take the share that Eve would have taken had she lived – one half
“Per stirpes” is used in estate planning so that a child of a beneficiary receives that beneficiary’s share in the event the beneficiary predeceases you. You can also put in your estate planning documents whether “descendants” includes individuals added to the family by adoption.
In the estate planning world, “per capita” means that if the beneficiaries are to share in a distribution, then all of the living members of the identified group will receive an equal share. However, if a member of the group is deceased, then a share won’t be created for the deceased member and all of the shares of the other members will be increased. So, if your estate is to be distributed to your then living descendants, “per capita,” here’s what happens in the same scenarios described above:
- Assume that Mark and Eve survived you – each gets half
- Assume that Eve predeceased you and Mark survived you. Mark gets the entire estate and Yvonne and Julie receive nothing.
“Per stirpes” is used more commonly in estate planning than “per capita” because it covers the typical family situation. If you prefer to use a “per capita” distribution, then you’ll need to see that your estate plan addresses any generation-skipping shares that may be created by this type of distribution. Leaving direct shares to grandchildren and great grandchildren through a per capita or other type of direct distribution while your children have also survived you will trigger the generation skipping transfer tax on the grandchildren’s and great grandchildren’s shares. So, work with a tax attorney to avoid this.