What’s the Difference Between Per Stirpes and Per Capita?
Per capita distributions can only go to the named beneficiaries. They don’t pass on to the next generation. They effectively remain in the estate should the beneficiary predecease the decedent, to be distributed equally among the beneficiaries who are still living.
Examples of Per Stirpes Distributions
Let’s assume that you have three children: Ann, Bart, and Carl. Ann has two children: Drew and Eve. Bart, Carl, Drew, and Eve have no descendants. Here’s what happens in a few different scenarios if your will or living trust states that your property is to be distributed to your “then living descendants, per stirpes.”
If Ann, Bart, Carl, Drew, and Eve have all survived you: Ann, Bart, and Carl each receive a 1/3 share. Drew and Eve will receive nothing.If Ann has predeceased you and Bart, Carl, Drew, and Eve have all survived you: Bart and Carl will each receive a 1/3 share. Drew and Eve will each receive a 1/6 share. They would take what Ann would have taken by representation and in equal shares, and 1/3 divided by 2 equals 1/6 each.If Ann, Carl, Drew, and Eve have all survived you and Bart has predeceased you: Ann and Carl will each receive a 1/2 share. A share won’t be created for Bart because he has predeceased you and wasn’t survived by any descendants. Drew and Eve will receive nothing.If Ann and Drew have predeceased you and Bart, Carl and Eve have all survived you: Bart and Carl will each receive a 1/3 share. Eve will receive a 1/3 share. She takes by representation what Ann would have taken. There’s no need to create a share for Drew because he has predeceased you and he wasn’t survived by any descendants.
Per stirpes is used in estate planning to cover all the bases in the typical family situation so you won’t have to amend your estate plan each time a child is born or a beneficiary dies. The term per stirpes is Latin for “by representation” or “by class.” Per stirpes distributions are used more commonly in estate planning than per capita distributions because they cover the typical family situation.
Examples of Per Capita Distributions
Here’s what happens if your last will and testament states that your property is to be distributed to your “then living descendants, per capita."
If Ann, Bart, Carl, Drew, and Eve have all survived you: Ann, Bart, Carl, Drew, and Eve will each receive a 1/5 share.If Ann has predeceased you and Bart, Carl, Drew and Eve have all survived you: Bart, Carl, Drew, and Eve will each receive a 1/4 share.If Ann, Carl, Drew, and Eve have all survived you and Bart has predeceased you: Ann, Carl, Drew, and Eve will each receive a 1/4 share.If Ann and Drew have predeceased you and Bart, Carl, and Eve have all survived you: Bart, Carl, and Eve will each receive a 1/3 share.
“Per capita” is Latin for “by head.” All the living members of the identified group will receive an equal share if the beneficiaries are to share in a distribution per capita. A share won’t be created for the deceased beneficiary, and all the other beneficiaries’ shares will be increased accordingly if one of the identified group is deceased. The deceased’s share would be absorbed proportionately by the others. An undesirable in-law might gain control over a portion of an estate if the decedent’s son is also deceased, so his share goes to his child in a per stirpes distribution. The child’s other parent would most likely end up with control over the distribution if the child is still a minor unless other provisions are made. Children can’t own or control their own property. A per capita distribution avoids this problem.
Another Thing to Consider
Leaving direct shares to grandchildren and great-grandchildren through a per capita or other type of direct distribution when your children have survived you will trigger the generation-skipping transfer tax on the grandchildren’s and great-grandchildren’s shares. Work closely with your estate-planning attorney to ensure that your estate avoids this extra and costly tax.
The Bottom Line
Per stirpes distributions can simplify your estate plan if you’re confident that you want your beneficiaries’ descendants to inherit their portions of your estate. Just keep in mind that you’re most likely giving your beneficiary’s spouse control of the inheritance if it passes to a descendant who is still a minor and who can’t yet legally control or own their own property. A per capita distribution gives you more control over who gets what, but you might have to keep going back and amending your estate plan each time a child is born or if beneficiaries predecease you.
