Per Stirpes Vs Per Capita are two different types of terms that can be included in a will. Your asset allocation may change depending on which one you choose. The both only apply if the beneficiary predeceases you, the grantor.
What is Per Stirpes?
Per Stirpes is Latin for “base” or “root”. You can think of it as a family tree. Even if a person is dead, his share will go down the tree to his roots – usually his children. A per stirpes scheme means that a person’s children will represent them if they die before the will is divided.
Using the same example, if you choose your children as a class and decide to divide your estate equally between them, but one of them dies, his share will be divided equally between their children.
This is called vesting by representation and means that the share will pass to the intended recipient’s family if they are no longer around to receive it.
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What Is Per Capita?
Per capita in Latin means “per head”. You can think of it as a head count – if you’re present, you get your share. If not, it will be divided among those present.
A per capita scheme identifies one or more lines in the family tree (called a class), such as your children, your grandchildren or great-grandchildren, and ensures that each of them receives an equal share of your estate.
They must still be alive to receive their share. To make it easier, let’s say you select your children as a class and each of them gets an equal share.
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What is The Difference Between Per Stirpes Vs Per Capita?
The answer lies in your original account documents and depends on whether you chose scholarships, per capita, or something else next to the beneficiary designation.
Per stirpes (Latin for root or branch) and per capita (per head) set the rules for how your retirement account is distributed if a beneficiary predeceases you. In either case, that person’s portion of your IRA will go to their children, but the amount each child receives may vary.
Under per stirpes rules, if a beneficiary predeceases you, his or her children will inherit that person’s money. On the other hand, the per capita figure looks at the total number of living beneficiaries and heirs, regardless of generation, and splits the bill evenly among all.
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What Is Per Stirpes Vs Per Capita In A Will?
Per Stirpes In A Will
Per stirpes is a legal term used in a will that specifies what should happen if one of your beneficiaries predeceases you. In the case of per stirpes, the inheritance will pass to the heirs of the deceased beneficiary.
What Does Per Stirpes Mean To Beneficiaries?
As a beneficiary, per stirpes means that your heirs will inherit on your behalf. This will happen if you die before the will. The donor is the person who created the will.
In most cases, your heirs will be your children or the closest person in your line of descent. If you were in line to receive an inheritance, but died early, your children will receive it instead. This creates a sense of security for you and your loved ones.
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Pros Of Per Stirpes
- Per Stirpes prevents the distribution of lost assets among multiple heirs, as it forces each heir to receive an equal share of the deceased person’s estate.
- It allows certain individuals to inherit even if they have already died, which is useful in cases where one heir predeceases another and would have inherited if he or she were still alive.
- This prevents the will from being contested because it ensures that each heir receives their rightful share of their loved one’s estate.
- It prevents future family conflict.
Cons of Per Stirpes
- Per Stirpes can be difficult and confusing for the heirs involved in the process, as they must understand that each child will receive an equal share of their parents’ estate.
- It can entrench animosity among family members, as it may not be something some heirs prefer during the estate planning process.
- An unwanted person can gain control of your assets (ie, the spouse of one or more children) if he/she manages them on behalf of a minor child.
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Per Capita In A Will
A “capita” will describes an arrangement whereby, if one of your beneficiaries predeceases you, your estate will be divided equally among your surviving beneficiaries.
For example, suppose you have two children, Sarah and William. In a will, you give instructions that your property will be transferred equally between the two of you. You include an equity condition.
You lived a long and healthy life and unfortunately William predeceased you due to health complications. Upon your eventual death, your estate will pass entirely to Sarah.
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What Does The Per Capita Mean For Beneficiaries?
If you are one of two or more beneficiaries named in the will, probate means you may inherit more than your equal share of the estate. This will only happen if one of your beneficiaries dies before the estate is distributed.
Their share of the estate will be divided equally among the surviving beneficiaries, not among that person’s heirs. If you were only one of two beneficiaries, you would inherit the property in its entirety.
Pros Of Per Capita
- Per capita is the simplest method used for estate planning because it makes dealing with assets and heirs much easier, although there are still several advantages to using this type of process:
- It ensures that the property is distributed evenly among the heirs, reducing family conflicts and arguments in the future.
- This ensures that you can name specific beneficiaries, so if certain family members helped raise your children, they can be included in the distribution of assets.
- It is much less complicated than other allocation methods and requires the least amount of planning.
Cons of Per Capita
- It does not protect any beneficiaries who predecease their loved one, which can cause problems among family members during estate planning.
- Generation-skipping tax can be a problem if your estate is large and you have grandchildren who will inherit part of it.
Conclusion
When it comes to your estate plan, you have many decisions to make. Perhaps one of the most important decisions is determining to whom and how you want your assets to pass after you die.
Whether you are creating a revocable living trust, a last will and testament, or both, you will need to name one or more beneficiaries who will receive distributions. Thoughtful and thoughtful estate planning also anticipates what will happen to the beneficiary’s share if you outlive him or her.
In situations where there are multiple beneficiaries at the same level (such as children, grandchildren, siblings, nieces and nephews, etc.), you will need to consider whether you prefer a “per stirpes” or “per capita” distribution.
Per Stirpes Vs Per Capita FAQs
What Does It Mean To Write “To My Children, Per Capita” In Your Will?
If you write “to my children, per capita” in your will, your estate will be divided equally only among your living children. If one of your children predeceases you, your estate is divided only among your surviving children. In this situation, your children’s descendants — such as your grandchildren — will not receive any part of their parents’ intended inheritance.
What Does It Mean To Write “To My Descendants, Per Capita” In Your Will?
If you write “to my descendants, per capita” in your will, your estate will be divided among a larger group that includes all of your living descendants. This includes your children, grandchildren, great-grandchildren, etc.
What Happens To Your Per Capita Distribution When A New Family Member Is Born?
If you use Per Capita distributions, you may need to update your estate plan when a beneficiary dies or a new family member is born. Per stirpes distributions avoid having to revise your estate plan if a family member changes beneficiaries because the descendants of the deceased beneficiary automatically inherit their share.
