Two terms that are important to estate planning are “per stirpes” and “per capita.” Both refer to the way that assets can be divided among a deceased person’s heirs.
These terms are definitely concepts you should know about when dividing up the assets in your estate.
Per stirpes distribution
This is a very common method of dividing an inheritance among multiple children. It’s favored because it easily accommodates situations where someone’s intended beneficiary dies before they can inherit.
In per stirpes distributions, each of your direct heirs, or children, will receive an equal portion of your estate. Essentially, the assets are divided by each branch of your family tree. If any of your children should die before you, those shares would pass to their children equally along the same branching lines.
For example, imagine that you have two children, Aaron and Beth. Aaron has no children but Beth has two, Carl and Diane. When you die, Aaron and Beth would each receive one-half of your estate. If Beth dies before you, Aaron would receive one-half of your estate and Carl and Diane would each receive one-fourth.
Per capita distribution
A per capita distribution is even simpler, but it can have unintentional results. Assets divided per capita are divided equally by the number of people who stand to inherit.
For example, imagine again that you have the same family as described before. Again, Aaron and Beth would each inherit one-half of your estate if they were both living. If Beth died before you, however, your estate would now be divided among Aaron, Carl and Diane equally. Aaron’s portion of the estate would be reduced to one-third.
It’s also possible to mix these two forms of distribution in order to address the generational mix, although that may have some tax consequences that you might hope to avoid.
There are a lot of nuances to estate planning that have to be considered in order to truly reflect your desires. Talk to an estate planning attorney about your intentions before you get started. That way, you can begin the process with a clear focus on your goals.
