One of the obvious benefits of having a will is you get to name the beneficiaries of your estate. When I sit down, as an estate planning lawyer St. Peters trusts, to meet people, they almost always have an idea of who is going to be their beneficiaries.
However, one thing that they often struggle to decide is how to divide their estate if one or more of their beneficiaries die before they do.
There are two options. The first is called “per stirpes” distribution and it means that if a beneficiary predeceases, their share goes to their survivors equally. The other option is called “per capita” distribution and it means that if a named beneficiary predeceases their share is then split only between the other name beneficiaries.
Let’s look at an example:
Sam and Sally have three children, Samuel, Sarah and Samantha. They each create wills that leave everything to the other spouse and then to the children in equal 1/3 shares, per stirpes. Sam passes away and then Sarah passes away five years later. Five years after that Sally dies. Her will controls the distribution of her estate and because she chose per stirpes distribution, Samuel will get 1/3, Samantha will get 1/3 and Sarah’s two children, will each split Sarah’s 1/3 share and each will get 1/6.
With a per capita distribution scheme, under the same example Sarah’s 1/3 would be split between her brother Samuel and sister Samantha. Sarah’s children would therefore receive nothing and Samuel and Samantha would each split the estate, ½ each.
You can see how the slightest change in one word (“stirpes” or “capita”) can result in a big change. Therefore, when I counsel clients I discuss these different options thoroughly and ask about their relationship with grandchildren, the health of their children and any potential problems that could develop within the family (which we want to avoid) if one scheme is chosen over the others.
There’s not really a right or wrong way to choose which distribution you want in your will or living trust. Based on my years of practice, I would say per stirpes is the choice of 90% of clients over per capita. Most people think that’s the fairest way and are concerned about beneficiaries getting more due to someone else’s death.
On the other hand, per capita can be a better choice if we’re worried about a distribution to grandchildren going to an unpopular daughter or son-in-law. That can happen when the distribution is made to the grandchild but taken improperly or used unnecessarily by their mother or father. That’s something to consider if you find yourself with an in-law that you don’t like.
In the end, careful consideration of all circumstances and preferences has to be examined and peace of mind is ultimately the goal with any estate plan.
Thanks to our friends and contributors from Legacy Law Center for their insight into Per Stirpes vs. Per Capita Distribution in a Will.