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Estate Planning: Choosing Per Stirpes or Per Capita Distributions

Living Trusts and Estate Planning - per stirpes or per capitaPer Stirpes or Per Capita Distributions

While Latin may be a dead language, it remains relevant to estate planning lawyers and their clients when choosing how to prepare for the distribution of an estate through a will or living trust. “Per Stirpes” literally means “by roots or stocks; by representation” and is used interchangeably with “right of representation” by estate planning attorneys when referring to a particular method for distributing assets of a decedent. An estate is distributed per stirpes if each “branch” of a family is to receive an equal share of the estate assets.

Another common method for distributing assets is referred to as “per capita”. Using ther method, each member of the same generation of a decedent will receive an equal share of the decedent’s estate.

Examples of Per Stirpes and Per Capita Distributions

A good way to illustrate the differences between these two types of distribution methods is by providing examples of each.

Per Stirpes Example #1: The decedent “A”, specifies in her living trust that her estate is to be divided among her descendants in equal shares per stirpesA has three children, BC, and DB is already dead, but has left two children (grandchildren of A), B1 and B2. Pursuant to a distribution per stirpes, the living children of the decedent, C and D each receive one-third of the estate, and B1 and B2 each receive one-sixth (B’s 1/3rd share). B1and B2 constitute one “branch” of the family, and collectively receive a share equal to the shares received by branches C and D.

Per Stirpes Example #2: Assume the same facts as Example #1 except grandchild B1 has predeceased A, leaving two children B1a and B1b, and grandchild B2 has also died leaving three children B2aB2b and B2c. In this case, distribution per stirpes would result in a distribution of one-third each to C and D, one-twelfth each to B1a and B1b, who would constitute a branch, and one-eighteenth each to B2aB2b and B2c, which again totals B’s one-third share. Thus, the BC, and D branches receive equal shares of the whole estate, the B1 and B2 branches receive equal shares of the B branch’s share, B1a and B1b receive equal shares of the B1branch’s share, and B2aB2b and B2c receive equal shares of the B2 branch’s share.

Per Capita Example #1: Assume the same facts as in the Per Stirpes Example #1. Under the per capita method of distributing the estate, since children C and D survive, the estate is divided at their generation. There were three children, so each surviving child receives one-third. The remainder – B ’​s share – is then divided in the same manner among B ’​s surviving descendants. The result is the same as under per stirpes because B ’​s one-third is distributed to B1 and B2 (one-sixth to each).

Per Capita Example #2: However, the per capita and per stirpes results differ if D also pre-deceased A with one child, D1. Under the per stirpes method, B1 and B2 would each receive one-sixth (half of B ’​s one-third share), and D1 would receive one-third (all of D ’​s one-third share). Under per capita, the two-thirds remaining after C ‘s one-third share was distributed would be divided equally among all three children of B and D. Each grandchild would therefore receive two-ninths: B1B2, and D1 would all receive two-ninths.

Summary

As you can see through these examples, the per capita distribution method is generally more generous to grandchildren of larger families. In other words, where a decedent has more than one child and one or more of the decedent’s children has more children (grandchildren of the decedent) then his or her siblings, those grandchildren of the larger family typically stand to receive a larger share of the decedent’s estate than under the per stirpes method of distribution. On the other hand, grandchildren of smaller families tend to receive less, since some of the share which they might receive under the per stirpes method is divided among the other beneficiaries of their generation.

In California, there are many variations on these types of distribution methods. Choosing per stirpes or per capita, or another method for dividing assets of your estate is but one of many important issues which must be considered by estate planning lawyers and clients when preparing wills and trusts since these choices can have long-term consequences for families.

We hope this article has been instructive in clarifying two of the most common methods for distributing assets. For more information, browse our website or to speak to our estate planning attorneys about your particular needs, call or write us today.

Click here for the California Probate Code and more information.

 

 

 

 

By | 2016-01-05T07:22:09+00:00 January 5th, 2016|Asset Protection, Estate Planning, living trust, Wills and Trusts|Comments Off on Estate Planning: Choosing Per Stirpes or Per Capita Distributions