Posted by Ronald J. Fichera Mar 14, 2023
Per stirpes is a legal term that may be included in a last will and testament to explain who will inherit assets if a beneficiary passes away before the testator, the person who has created the Will. With a per stirpes distribution, the beneficiary's share of the estate will pass to the beneficiary's descendants or heirs.
While the term per stirpes is commonly used to refer to an individual's assets under a will, it is sometimes used in beneficiary designations for Individual Retirement accounts (IRAs).
Per stirpes, Latin for “by branch,” refers to every person down a family tree beginning from another person. For example, everyone below a parent, such as their children and their great-grandchildren, is included in a branch.
Per stirpes often appear in Wills and retirement accounts to define asset distributions so that each branch of a family tree is treated by the testator or account owner's wishes. Children may stand as representatives of their parents if a parent passes before the decedent. ("Decedent" is a legal term used in tax and estate planning for a deceased person. When an individual dies, their possessions become part of their estate, and they are denoted as decedent or deceased. The legal Will of a decedent defines the final transactions of their estate.)
Spouses are not considered in per stirpes distribution.
Per capita means “by the heads.” Also called “share and share alike,” property is divided equally among surviving descendants in the same generation nearest the testator. The estate holder names each recipient individually or determines which group receives the assets, such as all the estate holder's children, grandchildren, or both. A deceased person's share is not set aside but is mingled with the estate and divided among the other recipients.
For example, Alejandra specifies her estate be divided per capita among her three children, Abigail, Stephanie, and Oliver. Abigail has one child, George. Oliver has two children—Hanaj and Anil. If Abigail dies, her portion remains with Alejandra's other assets and is divided equally among her two living children, Stephanie and Oliver. George does not inherit anything, nor do Hanaj and Anil.
If you die without a Will, your estate goes to your heirs according to the laws of the state in which you live.
Now consider the same example, but this time Alejandra's Will specifies her estate be divided per stirpes among her three children, Abigail, Stephanie, and Oliver. Abigail has one child, George. Oliver has two children—Hanaj and Anil. If Abigail dies, her portion will go to George, the next person on Abigail's branch of the family tree.
Hanaj and Anil again do not inherit anything.
Creating a will is one of the most important processes a person can go through; unfortunately, it can also be one of the most stressful and confusing. Occasionally, the use of outdated terms such as per stirpes can only create more confusion, especially when the term isn't used properly.
For example, some lawyers have allowed their clients to use the phrase "to my children, per stirpes." While this may sound straightforward, it is technically incorrect. Instead, the Will should read "to my descendants, per stirpes."
Furthermore, different jurisdictions have slightly different definitions of the term. This is why it's critical every lawyer takes the time to ensure their client doesn't have any incorrect preconceived notions about the term's meaning.
With a per capita arrangement, each beneficiary is given an equal share of the distribution. If one of the beneficiaries dies before the testator, the distribution remains with the other beneficiaries, and the descendants of that beneficiary are not included. Ultimately, the feelings of the testator about their family dynamic should decide whether per stirpes or per capita is used.
Per stirpes stipulates that should a beneficiary predecease the testator, that beneficiary's share of the inheritance goes to their heirs. Per capita takes the opposite approach: All inheritance is divided equally amongst the testator's beneficiaries.
To use per stirpes correctly, you should make the gift to a person's descendants, like "to [person's] descendants, per stirpes." In general, the person should be one person, not a class of people, and the word "descendants" (or "issue") must always appear.
Per stirpes determines that in the event of an "out of order" death, the inheritance which would have been awarded to the beneficiary that passed away is given to that beneficiary's descendants; thus per stripes covers the grandchildren of the testator.
Per stirpes, used more commonly than per capita, is a great way to ensure the descendants of your original beneficiaries are protected in the event of an untimely death.
Although distributing a loved one's assets after their death can be very stressful, making sure your will has very clear terms—and that those terms reflect your true intentions—can make the process much less difficult for your descendants. Because some jurisdictions have slightly different definitions of per stirpes, you must communicate your intentions to a legal professional.
This article was written by MAYA DOLLARHIDE and reviewed by MARGUERITA CHENG for Investopedia, and brought to you by the Ronald J. Fichera Law Firm, where our mission is to provide trusted, professional legal services and strategic advice to assist our clients in their personal and business matters. Our firm is committed to delivering efficient and cost-effective legal services focusing on communication, responsiveness, and attention to detail. For more information about our services, contact us today!
This is not tax advice and should not be construed as such. Please seek professional tax services for more information and advice that will apply to your specific tax situation.
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