Question:

What is the difference between a per stirpes and a per capita distribution of an estate?

Response:

It’s always confusing when lawyers or their documents use Latin words. You may have seen the terms “per capita at each generation” or “per stirpes” lurking in your will or trust. They are generally included in provisions for what will happen to your property if one of your heirs dies before you or before complete distribution of a trust. For instance, you may give your estate to your children but say that if one of them predeceases you their share will go to their children either per capita at each generation or per stirpes.

Per stirpes is the more traditional approach. It means “by roots” or “by branch” in Latin. Under its approach, each child or grandchild takes their parents share of an estate or trust. Depending on the numbers of grandchildren in a family and the timing of individuals’ deaths, this can mean that some grandchildren receive a bigger share of your estate than others. Per capita at each generation has been adopted more recently as a way to avoid this result.

This distinction only matters if two or more of your children were to die before you or to die before a trust for their benefit was completely distributed. The best way to explain these two terms is by example.

Let’s assume you have three children and six grandchildren distributed as follows:

Child A – one child

Child B – two children

Child C – three children

Let’s also assume that your estate when you pass away is valued at $900,000. If all of your children were to survive you, they would each receive $300,000. If one of your children were to die before you, her child or children would receive her $300,000 share to be divided among them. This is the approach under both methods of distributing property.

But what happens if two of your children were to die before you, let’s assume Child A and Child C? Here’s where the distinction between per stirpes and per capita at each generation would come in to play. Under the per stirpes approach, each child would still get their parent’s share. So the one child of Child A would receive $300,000 and the three children of Child C would each receive $100,000.

The more modern per capita approach provides that the two shares be combined and that all children of the predeceased members of the first generation share equally. In this case, the four children of Child A and Child C would each receive $150,000 ($600,000/4 = $150,000).

Our firm has adopted the per capita approach as the default unless our clients prefer per stirpes, but it’s up to you which way you want to go.