You have several options for setting up and distributing your estate. Per stirpes and per capita are two methods of dispersing your estate when a beneficiary predeceases you. These arrangements have important differences with unique legal implications.
Our Charlotte estate lawyers lay out what you need to know about per stirpes v. per capita distribution and how to decide which is suitable for your estate plan.
What Is Per Stirpes Distribution?
Per stirpes is Latin for “by branch” or “by roots.” In estate planning, per stirpes means the beneficiaries most closely related to you receive an equal share of your estate after you pass away.
If the beneficiary dies before you do, per stirpes would dictate that their share would go to their descendants instead. If the beneficiary has no descendants, their share would be distributed evenly among your other beneficiaries. This arrangement helps keep assets within family branches if your chosen beneficiary passes away.
What Is Per Capita Distribution?
Per capita is Latin for “by head.” In estate planning, per capita distribution means your assets will be divided evenly between your living beneficiaries.
A big plus of the per capita method is that it allows you to name beneficiaries individually or state which groups (for example, children or grandchildren) should receive your assets.
Per Stirpes v. Per Capita Example Scenarios
Below are examples of how per stirpes and per capita estate distribution can play out in different scenarios. Keep in mind that real-life situations can be much more complex, especially if you have a diverse family structure.
An estate planning lawyer can explain how per stirpes v. per capita would apply to your estate and help you make the right choice.
Example 1 — Per Stirpes: Family with Three Branches
John has three children: A, B, and C. He leaves his estate equally to them “per stirpes.” If all children survive, each receives 1/3 of the estate.
If beneficiary A predeceases John, A’s share goes to his two children, A1 and A2, each inheriting 1/6. B and C still receive their full shares. If B predeceases John, but A and C survive, B’s share is split equally between A and C, increasing their shares to 2/3 each.
Example 2 — Per Capita: Blended Family and Unequal Shares
Mary leaves her estate “per capita” to her two children, D and E, and her grandchild, F (D’s child). D initially receives a 50% share, and E and F each receive 25% shares.
If D predeceases Mary, his 50% share is divided equally among E and F. If E predeceases Mary, their 25% share is split equally between D and F.
Which Distribution Method Should You Choose?
Both per stirpes and per capita distribution only come into play if one of your beneficiaries precedes you in death. The main difference is whether you prefer the beneficiary’s inheritance to be passed to the next-in-line heir (or heirs) or divided evenly among the other surviving beneficiaries.
Pros of Both Methods
The biggest advantages of per stirpes are:
- Ensure family continuity: Your assets remain in your family.
- Predictable distribution: You don’t need to update or revise your will if a beneficiary predeceases.
The benefits of per capita are:
- Equal distribution among surviving beneficiaries: Each beneficiary receives an equal share at the same generation level.
- Simple and straightforward: Applying per capita is easier, especially when dealing with smaller estates or few beneficiaries.
- Flexibility: Changes in family dynamics can be more easily accommodated in the estate plan
Cons of Both Methods
The drawbacks of per stirpes include:
- Unequal distribution among generations: Younger generations may receive smaller shares compared to older beneficiaries.
- Complexities may arise: Determining eligibility for inheritance can be intricate, especially when dealing with blended families or multiple descendants.
- Potential disinheritance of unwanted heirs: Descendants of disfavored beneficiaries may still inherit under per stirpes, contrary to the testator’s wishes.
Some downsides of pro capita are:
- Excludes descendants of deceased beneficiaries: Children or grandchildren of the deceased are not included in the distribution, potentially breaking family continuity.
- Possible unintended consequences: Unforeseen beneficiaries may inherit if one parent predeceases, contrary to the testator’s intent.
- Increased risk of generation-skipping transfer tax: If younger beneficiaries inherit large shares directly, it may trigger a tax penalty.
Call an Estate Planning Lawyer in Charlotte Today
If you’re ready to create an estate plan to include per stirpes or per capita distribution, an estate planning attorney can help.
Charlotte Estate Planning can draft your will or trust document and specify your chosen distribution method to ensure your wishes are carried out accordingly. This way, you can rest more comfortably about the future of your estate, knowing the potential for conflict is significantly reduced.
Call Charlotte Estate Planning today at (704) 766-8836 or contact us to schedule an initial consultation.
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