Most statutes and legal documents include strange terms of art that might mean little to the layperson. Estate planning documents, and the laws that govern them, unfortunately are no exception. Certainly, your estate planning attorney will be able to explain the terms in your planning documents to you. But having a basic knowledge of some legal terms that may apply to you, can be helpful. For example, the terms “per stirpes” and “per capita” are used to describe different methods of distributing a person’s estate. Being familiar with the concepts of per stirpes and per capita distribution can make preparing your estate plan a little easier.
Per Stirpes distribution
“Per stirpes,” is a Latin term that means “by the roots.” When an estate is distributed per stirpes, it means every living member of each “group” of heirs or beneficiaries will receive a proportional share of the assets of the deceased ancestor would have received. For instance, a man dies intestate, which means without a will, and his wife has already passed away. The couple had four children, but only three of them are still alive at the time of the man’s death. The deceased child left behind two children, who are still living at this time. Under a per stirpes distribution, the man’s estate will be divided into four equal portions. The three living children each receive a one-fourth share. The two grandchildren (children of the deceased child) would share the remaining one-fourth share.
Per Capita distribution
Per capita, also a Latin term, literally means “by the head.” When an estate is distributed per capita, all living members of a group receive an equal share of the decedent’s estate. The primary difference between per stirpes and per capita is that, if one member of the group is not alive, his share does not pass on to his descendants. Instead, that share is passed on to the other members of the group. So, in the example above, instead of the three living children receiving one-fourth shares, they would receive one-third shares. However, none of the grandchildren would receive a share of the estate.
Per stirpes is more commonly used
Per stirpes is used more commonly in estate planning, as it typically addresses the classic family situation. However, if you believe a per capita distribution may be a better fit for your family circumstances, then it is a good idea to discuss with your estate planning attorney possible generation skipping issues that may arise. For example, if you leave a distribution directly to your grandchildren, although your children survived you, your estate will probably be subject to a generation skipping transfer tax. There are certain estate planning tools available, which are designed to eliminate this particular tax, such as a generation skipping trust. To be sure you are covered, discuss all of your options with your estate planning attorney.
If you have questions regarding per capita or per stirpes distribution, or any other estate planning needs, please contact Sexton, Bailey Attorneys, PA online or by calling us at (479) 443-0062.