Quantcast

Friday, July 26, 2013

WHAT DOES “PER STIRPES” MEAN AND WHY IS IT IN MY WILL?

You find the words “per stirpes” in a paragraph that goes something like this, “I leave my grand piano to my dearest cousin Herbie Jazz. If Herbie doesn’t survive me then to his decedents per stripes.”  “Per stirpes” is a Latin word meaning to take “by representation” or “by class.”

Basically, if the named beneficiary (Herbie) dies before the testator (the person who’s Will it is), then all of the living people who are closest in relationship to Herbie, basically his children, will take “by representation” what their deceased parent would have taken, and if any of those children pre-decease the testator, their children will take by representation what their deceased parent would have taken and so it goes down the line.


The easiest way to explain the concept is by a few examples. Let’s assume the following:
You have three children, Annie, Betty and Carly
Annie has two children, Dita and Eva
Betty, Carly, Dita and Eva all have 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 Annie, Betty, Cindy, Dita and Eva have all survived you: 

  • Annie, Betty and Cindy will each receive a 1/3 share 
  • Dita and Eva will receive nothing 
Assume that Annie has predeceased you and Betty, Cindy, Dita and Eva have all survived you:
  • Betty and Cindy will each receive a 1/3 share 
  • Dita and Eva will each receive a 1/6 share; they take by representation and in equal shares what Annie would have taken: 1/3 divided by 2 = 1/6 each 
Assume that Annie, Cindy, Dita and Eva have all survived you and Betty has predeceased you:
  • Annie and Cindy will each receive a 1/2 share; a share won’t be created for Betty since she has predeceased you and wasn’t survived by any descendants 
  • Dita and Eva will receive nothing 
Assume that Annie and Dita have predeceased you and Betty, Cindy and Eva have all survived you:
  • Betty and Cindy will each receive a 1/3 share 
  • Eva will receive a 1/3 share; she takes by representation what Annie would have taken and there's no need to create a share for Dita since she has predeceased you and wasn’t survived by any descendants 


“Per stirpes” is used in estate planning to cover all of the bases in the typical family situation so that you don’t have pay your attorney to change your estate documents each time a child or other beneficiary predeceases you. However, not everyone wants this method of automatically passing things down through the generations and those that do want to use this method don’t necessarily want it for every item in their estate. Maybe you only want to give Herbie the piano because you know he will love it, but if he isn’t alive when you die you want it to go to one of your kids instead of his kids.


Now, I hope right about now you are rummaging in your file cabinet to look at your documents. 

Look closely, you may find the words “per capita” where I’ve just said you will find “per stirpes.”  “Per capita” means taking “by total head count” or “by total number of individuals.” In the estate planning context, this means that if the beneficiaries are to share in a distribution “per capita,” then ALL of the living members of the identified group will receive an equal share. However, if a member of the identified 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 accordingly.

So, assuming you are in the same alphabet family above and your Last Will and Testament or Trust states that your property is to be distributed to your “then living descendants, per capita,” here’s what happens in the same scenarios described above: 

Assume that Annie, Betty Cindy, Dita and Eva have all survived you:
  • Annie, Betty, Cindy, Dita and Eva will each receive a 1/5 share 
Assume that Ann has predeceased you and Betty, Cindy, Dita and Eva have all survived you:
  • Betty, Cindy, Dita and Eva will each receive a 1/4 share 
Assume that Annie, Carly, Dita and Eva have all survived you and Betty has predeceased you:
  • Annie, Cindy, Dita and Eva will each receive a 1/4 share 
Assume that Annie and Dita have predeceased you and Betty, Cindy and Eva have all survived you:
  • Betty, Cindy and Eva will each receive a 1/3 share 


Now, just to confuse you more:  In some states (including California) you have a third option called “per capita with right of representation.”  This hybrid is worth consideration because it treats all of the grandchildren equally instead of penalizing them for having siblings.  Rather than inheriting only what your parent would have received, you inherit an equal share to everyone else in your generation.  Going back to our alphabet family:

Assume that your second child, Betty, gives birth to a beautiful baby boy named Frank.  Then, sadly, both she and your first born Annie both predecease you.

Per stirpes result:

  • Cindy will receive her 1/3 share.  Dita and Eva will each inherit 1/6 share (the 1/3 that Annie would have received decided between them) and Frank will receive 1/3 share (the inheritance his mother Betty would have received.)  See how it isn’t evenly split between the grandchildren?

Per Capita at each generation result:

  • Cindy receives her 1/3 share.  Dita, Eva, and Frank will then split the remaining 2/3rds share equally.  
Note that the result would be the same even if Cindy had kids.  The next generation only inherits if their parents predeceased you.

See the difference?  


If, after reading this post, you check your documents and discover that all is not how you imagined it to be, I recommend you call your estate planning attorney right away to change it. This is one of many areas where the form Will you purchased at the stationary store may not be what you want.  Also, if you have a large estate you will definitely want to check the tax implications of any strategy you choose as there could be a huge difference in the tax ramifications of leaving by per stirpes or per capita.
Related Posts Plugin for WordPress, Blogger...