When reading over an estate plan, terms such as per stirpes and per capita distribution often appear. These terms describe different ways to distribute property to heirs after someone passes away. While these terms may seem confusing at first, they are deeply embedded in legal tradition and it is important to understand what they mean as part of your estate plan. Here are some explanations and examples:
Per Stirpes Distribution
Per Stirpes distribution is often the more popular term in estate plans since it mirrors how most people want their property distributed if a child predeceases them. With a per stirpes distribution plan, property that would have passed to a child who predeceased the parent would instead pass to the child’s children (the deceased parent’s grandchildren).
Bob passed away. His last will and testament left everything equally to his three children per stirpes. His son, A, predeceased him leaving three children. His daughter, B, has three children and his son, C, has two children. A per stirpes distribution would look like this:
Starting with the first generation with someone alive, upon Bob’s death, the shares will be divided evenly between living and deceased children. Each of A, B and C are entitled to 1/3 of Bob’s estate. Since A is deceased, A’s 1/3 will be distributed equally to A’s children. Thus, A1, A2, and A3 will each receive 1/3 ÷ 3 = 1/9.
On the other hand, if A did not have any children, and the distribution would look like this:
We would still start with the first generation, but A would not get anything since he is deceased and he has no children to inherit his share. Thus, B and C would each get ½ of Bob’s estate. Since B and C are still alive, none of their inheritance from Bob would go to their children.
Per Capita Distribution
Per Capita distribution is a little more complicated. Here, assets are divided at the first generation where someone is alive. One share is then allocated to each surviving or predeceased child. Each surviving child gets one share while the remaining shares are distributed per capita among children of any of the predeceased child. With a per capita distribution, if someone is not alive, their share goes “back into the pot” and divided equally at the next generation.
Bob passed away and two of his children, A, and B, predeceased him. Bob’s will left everything equally to his three children. This distribution would look like this:
Here, since C is still alive, C will get 1/3 of Bob’s estate. Since A and B are deceased, their 1/3 shares go back into the pot and will be split evenly between their children. Thus, 1/3 + 1/3 = 2/3 and then 2/3 ÷ 6 grandchildren = 1/9 to each of A and B’s children.
Now, it gets a bit more complicated when Bob’s grandchildren have predeceased him and he has great grandchildren. Lets say Bob passed away and his two children B and C predeceased him. Here, B has two children, B1 and B2, but B1 predeceased Bob. B1 left two children behind. C also had three children, C1, C2, and C3, but C1 and C2 predeceased Bob. C1 left behind two children. C2 had one child who also predeceased Bob, but left behind one child. A has no children. A distribution in this scenario would look like this:
Here, we start with the first generation since A is still alive. Thus, A gets 1/3 of Bob’s estate. The 1/3 that B and C would have received is combined back into the pot and distributed to the next generation. Since there are five people in this generation, each person would get a 2/15 share (2/3 ÷ 5 = 2/15). Since they are still living, B2 and C3 would each get 2/15. However, since B1, C1, and C2 have all predeceased Bob, we need to put their shares back in the pot and divide them again, 2/15 x 3 = 2/5. Then, we divide up those shares by the number of living heirs at the next generation (in this case, 5 living heirs), so 2/5 ÷ 5 = 2/25. So each D, E, F, and G would get 2/25, and I would inherit H’s 2/25 share.
If you are currently or anticipate drafting an estate plan, you will more than likely be faced with per stirpes or per capita division issues. In order to ensure you receive the most equitable result possible, we strongly encourage you to seek the assistance of a qualified estate planning attorney. At Neal Law Firm, we are experienced with these kinds of distribution issues and can help you choose which is best for you and your family.