Hailey Johnson
When it comes to estate planning, per capita and per stirpes are two methods of distributing assets to beneficiaries. Per capita, which means per head in Latin, involves dividing the estate equally among surviving members of a specified class, such as children or descendants. On the other hand, per stirpes, or by branch, ensures that if a beneficiary dies before the testator, their share is passed down to their descendants. While per stirpes is the more common option, per capita may be preferable in certain scenarios, such as when one wishes to include new beneficiaries or redistribute a deceased beneficiary's share among those still living. Understanding these nuances is crucial when making informed decisions about beneficiary designations and estate planning.
| Characteristics | Values |
|---|---|
| Per stirpes vs per capita | Two different ways of distributing assets when a beneficiary predeceases you |
| Per stirpes beneficiaries | Direct lineal descendants only (children, grandchildren, etc.) |
| Per capita beneficiaries | None of the lineal descendants (children and grandchildren) will get a share of the inheritance unless explicitly included in the estate planning document |
| Per capita distribution | Passes assets to the next generation by combining the shares of deceased beneficiaries into one pot and then dividing it by the total number of beneficiaries in the next generation |
| Per capita distribution | Distributes the deceased beneficiary's share equally among the remaining beneficiaries |
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What You'll Learn
Per Stirpes vs Per Capita
When drafting a will, understanding the legal terminology is crucial to ensuring your estate is distributed according to your wishes. The Latin phrases "per stirpes" and "per capita" play a vital role in determining how your assets are allocated among your beneficiaries, especially if one of them predeceases you.
Per stirpes and per capita refer to two different ways of distributing assets when a beneficiary predeceases the testator. Per stirpes means that the beneficiary's inheritance will be passed on to their next-in-line heir or heirs. It is derived from the Latin term "by branch", indicating that the inheritance passes down the family tree to the beneficiary's lineal descendants, such as children or grandchildren. This ensures that each branch of the family receives an equitable portion of the estate. For example, if one of your children is no longer alive, their share would be divided equally among their offspring. Per stirpes beneficiaries only include direct lineal descendants, such as children and grandchildren. A beneficiary's surviving spouse does not inherit under a per stirpes distribution. If a deceased beneficiary has no living children or grandchildren, their share returns to the estate and is split between the living beneficiaries.
Per capita, on the other hand, is derived from the Latin term "by head". It ensures that all beneficiaries within the same generation receive equal shares of the estate. Per capita distribution also passes assets to the next generation but combines the shares of deceased beneficiaries into one pot, which is then divided by the total number of beneficiaries in the next generation. If you are a beneficiary, per capita means that you may inherit more than your equal share of the estate if another beneficiary passes away. It also means that none of your lineal descendants will get a share of the inheritance unless they are explicitly included in the estate planning document.
There is no right or wrong choice between per stirpes and per capita. Per stirpes is the more common option as it provides a safeguard for grandchildren. However, per capita may be preferred if one wishes to reallocate a deceased beneficiary's shares among the remaining beneficiaries or include new beneficiaries upon a beneficiary's passing.
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Per Capita distribution and the next generation
Per capita distribution is one of two ways of distributing assets when a beneficiary dies before the account holder. The other way is per stirpes distribution. Per capita means that a beneficiary may end up inheriting more than their share of the estate if another beneficiary passes away. It also means that none of their lineal descendants (children and grandchildren) will get a share of the inheritance unless they are explicitly included in the estate planning document.
Per stirpes is the more common option. One key benefit of per stirpes distribution is that grandchildren are protected even if the beneficiary dies before updating their estate planning documents. However, per capita distribution also passes assets to the next generation. In this model, the shares allocated to deceased beneficiaries are combined and then divided by the total number of beneficiaries in the next generation.
For example, if James leaves one-third of his IRA to each of his three children, per capita, and two of his children predecease him, the one-third share of each of the two deceased children is combined into a single share of two-thirds. That share is then divided by five, the number of grandchildren, with each grandchild receiving one-fifteenth of the estate.
Per capita at each generation is a designation applied to a gift in a will to the descendants of a particular person, providing a clear rule for how the gift should be divided among those descendants. It is similar but not identical to the designation by right of representation. The difference is that gifts given per capita at each generation are divided according to the number of surviving descendants in each generation, rather than according to the number of branches of descendants.
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Per Stirpes: protecting grandchildren
Per stirpes and per capita refer to two different ways of distributing assets when a beneficiary predeceases the testator. Per stirpes is a Latin term that means "by branch". It is a legal stipulation that, in the event of an "out of order" death, the beneficiary's share of the inheritance will go to their heirs. This includes everyone descending the branch of a family tree from a single person, such as children, grandchildren, and great-grandchildren.
Per stirpes is a way to protect beneficiaries and their heirs. It ensures that the inheritance will go to the intended branch of the family, even if the beneficiary dies before the testator. This can be especially important for protecting grandchildren, as it ensures that they will not be disinherited if their parent (the original beneficiary) dies before the testator.
For example, consider a family with a parent, Maria, who has two children, Flora and Shauna. Flora has two children, Stephanie and Robert, while Shauna has one child, River, and two grandchildren (Maria's great-grandchildren), Bruno and Sofia. If Maria's will indicates that her estate will be distributed per stirpes, each of her children will receive half. If Shauna and River pass away before Maria, the estate will be divided in two again. Half will go to Flora, and the other half will be split between River's children, Bruno and Sofia.
Per capita distribution also passes assets to the next generation, but it works differently. In this model, the shares allocated to deceased beneficiaries are combined, and then divided by the total number of beneficiaries in the next generation. For example, if Peter has an estate worth $3 million and three children, and he states in his will that he leaves his estate to his children per capita, each child will receive one-third of the estate. However, if one of Peter's children, Stacy, predeceases him, the estate will be split in half between his two living children.
There is no right or wrong choice between per stirpes and per capita, and the best option depends on the family situation and how the assets should be divided. Per stirpes is a common option as it protects grandchildren and eliminates the need to update estate planning documents after a beneficiary dies. However, per capita may be preferred if the testator would like to reallocate a deceased beneficiary's shares or include new beneficiaries upon a beneficiary's passing.
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Per Capita: inheriting more than your share
When it comes to estate planning, per capita and per stirpes are two terms that refer to different ways of distributing assets when a beneficiary predeceases the account holder. Per stirpes is the more common option, and it means that the beneficiary's heirs will receive the inheritance on their behalf. It only includes direct lineal descendants, like children and grandchildren. On the other hand, per capita can result in inheriting more than your share of the estate if another beneficiary passes away. It also prevents lineal descendants from receiving a share of the inheritance unless explicitly included in the estate planning document.
Per capita is a Latin term meaning "by the heads," while per stirpes means "by branch" or "by root." In the case of per capita distribution, assets are passed to the next generation, but the shares of deceased beneficiaries are combined and then divided by the total number of beneficiaries in the next generation. This means that if a beneficiary has no living children or grandchildren, their share is split between the remaining beneficiaries, which can result in some beneficiaries receiving more than their original share.
For example, consider Peter, who has an estate worth $3 million and three children: Henry (no children), Stacy (two children), and Amy (one child). In his will, Peter states that he leaves his estate to his children, per capita. When Peter passes away, each child receives one-third of the estate. However, if Stacy predeceases Peter, the estate is then split in half between Henry and Amy, resulting in them inheriting more than their original share.
Per capita distribution gives the account holder control over which individuals or groups are included as beneficiaries. It allows for changes to beneficiary designations, such as excluding an ex-spouse after a divorce. However, per capita distributions may trigger generation-skipping tax for grandchildren or other descendants who inherit.
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Per Stirpes and Per Capita in wills
Per stirpes and per capita are two different types of stipulations that can be included in a will to determine how assets are distributed. Both stipulations only come into play if a beneficiary passes away before the grantor. The grantor is the individual who created the will.
Per stirpes is a legal term that means "by branch" or "by roots" in Latin. In a will, it signifies that the beneficiary's share of an estate will go to their descendants or heirs if they die before the testator (the person who created the will). Per stirpes beneficiaries include direct lineal descendants, such as children and grandchildren, but not spouses or other living relatives. This type of stipulation is often used in wills to ensure that assets are distributed according to the wishes of the testator.
Per capita, on the other hand, means "by the heads." In a will, per capita describes an arrangement in which, if one of the beneficiaries were to pass away before the grantor, their share of the estate would be distributed evenly among the surviving beneficiaries. For example, if a parent has two children, and one child predeceases the parent, per capita would mean that the parent's estate would be split in half between the surviving child and the deceased child's children.
There is no right or wrong choice between per stirpes and per capita, and the distribution of assets can change based on which one is chosen. The correct choice will depend on the family situation and the wishes of the individual creating the will. Per stirpes is the more common option, as it offers a sense of security for grandchildren, even if the will is not updated after a beneficiary dies. However, per capita may be preferred if the wish is to reallocate a deceased beneficiary's shares among the remaining beneficiaries.
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