When it comes to dividing an estate, I have long advocated fair is not always equal and equal is not always fair. Deciding who gets what and how much may be the toughest part of estate planning as there are no guidelines to follow. Every situation is unique. It is important to utilize a Certified Financial Planner TM professional to work in conjunction with an attorney experienced in estate distribution to prevent unintended consequences.
One common area of confusion is per stirpes versus per capita. Both are Latin terms often seen in legal documents in regards to property distribution.
With per stirpes, your property passes equally among your issue (your direct descendents). If any of your issue has previously died, then that portion is divided equally among their issue.
With per capita, first the number of eligible beneficiaries must be determined. The eligible beneficiaries are any living direct descendents and the issue of any direct descendents who have previously died.
Clear as mud? Perhaps an example and a picture may help.
Suppose you have three children named A, B, C and each of your children has given you two grandchildren (A1, A2, B1, B2, C1, and C3). "A" was tragically killed in an automobile accident some years ago. Your family tree looks something like this:
If you leave your estate per stirpes, your children are each entitled to 1/3. Since A has already died, that share is divided equally by A's children. So A1 and A2 each get 1/6 of the estate (half of 1/3) and B & C each get 1/3.
Now suppose you leave your estate per capita. There are 4 living beneficiaries; A1, A2, B, and C and the estate is divided equally among them.
per stirpes inheritance |
per capita inheritance | |
A1 |
1/6 |
1/4 |
A2 |
1/6 |
1/4 |
B |
1/3 |
1/4 |
C |
1/3 |
1/4 |
There is no right or wrong, but without proper planning your estate may not get distributed according to your desires.
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