The law is riddled with archaic latin terms that can be confusing and estate planning is no exception. You might have seen the term "per stirpes," "per capita," or "per capita with representation" used in your will or trust. Sometimes these terms are misread as "per stripes" and "per capital," which only adds to the confusion. Until estate planners make the conscious decision to use plain-language in drafting documents, it is worthwhile to learn these terms as they determine the distribution of your estate to beneficiaries.
For illustrative purposes, let's imagine a family comprised of a mom ("Mary") with three children ("Alex," "Beth," and "Carol") and three grandchildren (Beth's child, "Dan," and Carol's children, "Eric" and "Fiona").
If Mary decides to distribute her estate "per stirpes," then this means that the estate will be distributed in equal shares to each living beneficiary in the generation closest to Mary, which is her children. The descendants of any deceased children, Mary's grandchildren, take by representation and split the deceased parent's share.
If all of her three children are alive when Mary dies, then they will each get 1/3 of Mary's estate. Simple. However, things get tricky when any of Mary's children die before her. For example, if Alex dies before Mary, then Beth and Carol will each get 1/2 of Mary's estate. Alex is not given a share because he doesn't have any living children. If Alex had children, then they would split what would have been his 1/3 share.
If the estate is distributed "per capita," then living beneficiaries in the generation closest to Mary will receive an equal share much like "per stirpes." The exception occurs if any of Mary's children die before her. The descendants of any deceased children, do not split the deceased parent's share. Instead the children's share of the estate increases and the grandchildren receive nothing.
For example, if Carol dies before Mary, then Alex and Beth will each get 1/2 of Mary's estate. Carol isn't given a share even though she has living children. Carol's children, Dan and Eric, get nothing.
If Mary distributes her estate "per capita with representation," then the outcome is the same as our "per stirpes" example. Things are different, however, if all of Mary's children die before her. In that case, Dan, Eric, and Fiona would each get 1/3 of Mary's estate. If it were "per stirpes," then Dan, Eric, and Fiona would inherit what would have been the share of their parents. Dan would get what would have been Beth's share, which is 1/2. Eric and Fiona would split what would have been Carol's 1/2 share and get 1/4 each.
"Per stirpes," "per capita," and "per capita with representation" are important terms, yet they can be very confusing for just about anyone. As beneficiaries die and others are born, it can get complicated and have unintended results. The better way is to eliminate these terms completely and specifically name your beneficiaries. Make your intentions clear. Yes, it takes a little more effort, but the effort is minimal compared to the satisfaction that your estate is distributed to your exact specifications and that your beneficiaries aren't battling it out in court over the interpretation of an archaic latin term.
DISCLAIMER: All information available at this website are for informational purposes only and is not legal advice. You should contact an attorney directly regarding your specific situation. Use of and access to this website or any of the email links contained within the site do not create an attorney-client relationship between the Law Office of Keoni Souza, LLC and any users or any other party.
