Per Stirpes, By Representation, and Per Capita Distributions

Gabriel Katzner - November 9, 2020 - Estate Planning
Per Stirpes, By Representation, and Per Capita Distributions

The notion of “fairness” often drives family dynamics during the childrearing years, and this concept often continues to play a strong role as parents age. The dynamics that are established at this point often carry on beyond death when decisions about property divisions arise. The law addresses different notions of fairness with a variety of distribution strategies. Per stirpes, by representation, and per capita are the terms used most often in wills and trust agreements that specify the ways assets can be equitably divided. These methods achieve fairness in different ways and with different results. 

For the purpose of this discussion, let us start with the basics and focus only on the children who belong to both parents. In the simplest case, when a parent dies and his or her accounts and property are divided among the children, the children split everything equally. This is the most basic inheritance distribution principle. Sometimes, however, grown children predecease their parents, leaving behind children of their own. Per stirpes, by representation, and per capita distribution best apply when grandchildren are relevant parties after the death of a child. 

Per Stirpes Distribution

Per stirpes comes from the Latin term meaning “by roots” or “by branch.” Per stirpes distribution means that whatever would have originally passed on to a child had that child survived the parent will now pass on to the children of the predeceased child— the grandchildren. For example: Robert has two children, Betsy and Cameron. Betsy has four children of her own, and Cameron has one child.

After Robert dies, Betsy and Cameron each receive ½ of what Robert owned. However, if Betsy dies before Robert, Betsy’s share will pass to her children. Per stirpes distribution means if Betsy has four children, the four will divide their mother’s half of the money and property equally. Each of these four grandchildren will receive ⅛ of Roberts estate, while Cameron—Robert’s other child– will receive ½ as his share. To make sure this happens, a trust might include language stating: “My trustee shall distribute my trust property per stirpes to my then living descendants.”

If both Cameron and Betsy die before Robert, the grandchildren would be entitled to different amounts through Betsy than through Cameron. Cameron’s son would inherit Cameron’s entire share (half of what Robert owned), while the other four grandchildren would each inherit ⅛. The result is a disproportionate distribution of Robert’s estate among the grandchildren.

By Representation Distribution

To understand “by representation” distribution, let’s look at the first generation of living descendants to divide the accounts and property and equally represent each person at that level. This means that some grandchildren may not receive any of the inheritance because their parents are alive to inherit the total share. For instance, imagine if Robert’s son Cameron is still alive, and Cameron’s children will not inherit any portion.

If all of Robert’s children predecease him, the first generation that would have inherited Robert’s property and accounts will be gone. Under by representation distribution, Robert’s accounts and property will be distributed equally among all of the grandchildren. An even redistribution will take place among the second generation.

Per Capita at Each Generation Distribution

Per capita means “by headcount”, and to review an example of this distribution, assume the trust language says “My trustee shall distribute my trust property per capita at each generation to my then living descendants.” In this case, individuals in the same generation would receive equal shares. Imagine that Robert has three children, and each of his children has children. If two of Robert’s children predecease him, their children will inherit their respective shares, divided evenly among any siblings. 

Contact us to Learn More

Each of these distribution strategies follows a form of fairness, but what is fair can be subjective. As you make plans for your family, reach out to our team. We’ll help you craft a customized plan that feels right for you. We are available for both in-person and virtual consultations.

 

You can use the link below to schedule a call with Gabriel Katzner, or just call us at 855.528.9637 to learn more about how best to plan today to protect those most important to you





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