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Per Stirpes Definition – Wills and Estate Planning

Per Stirpes – What Does it Mean?

Per Stirpes

Per Stirpes, used in a will stipulates how assets are to transfer if beneficiaries pass away before you do. It passes their share to their heirs.

Per stirpes is a designation that instructs where and how your assets should be passed down in the event a beneficiary passes away before you do. For example, if a beneficiary dies before you do, their share of your estate will automatically and evenly go to their child or children.  Many will stipulate that the estate is to be distributed per stirpes.  In that case, if a beneficiary dies, each named, living beneficiary receives their original portion of the estate. Any heirs of the deceased beneficiary split that portion of the inheritance equally.

The term per stirpes is commonly used to refer to an individual’s assets under a will.  However, it is sometimes used in individual retirement accounts (IRAs) to designate the beneficiaries.

Per stirpes and per capita are similar, but there are differences. Per stirpes in Latin means by branch.  In this case, that a portion of the will must go to a person or that person’s heirs. Per capita means by the head.  Therefore, any surviving descendants of the same generation distribute property equally, by headcount.

How Per Stirpes Works

Per stirpes means by branch. Therefore, it refers to the person named as well as every person down that family tree. For example, everyone below a mother including her children and her great-grandchildren is included in a branch. Per stirpes appears in wills and retirement accounts to define asset distributions.  So, each branch of a family tree is named in accordance with the testator or account owner’s wishes. Children then stand as representatives of their parents if a parent passes before the decedent. Spouses are not considered in per stirpes distribution.

Per stirpes example

For example, John Sr. specifies his estate to be divided per stirpes among his three children, Jonny, Mary, and William. Mary has one child. William has two children. If Mary dies before her father, her one-third portion is passed on to her one child, the next in line on Mary’s family tree branch.  The remaining two-thirds of John Sr.’s other assets are divided equally among his two living children, Jonny and William. William’s two children (John’s grandchildren) do not inherit anything.

Does per Stirpes go to a Spouse?

Spouses are generally not part of a per stirpes distribution.

Which is Better per Stirpes or per Capita?

Per capita means by the heads. It is also called share and share-alike. The 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.  This could be all the estate holder’s children, grandchildren, or both. A deceased person’s share is not set aside.  Instead, it is mingled with the estate and divided among the other recipients.

Per capita example

For example, John Sr. specifies his estate to be divided per capita among his three children, Jonny, Mary, and William. Mary has one child. William has two children. If Mary dies, her portion remains with John Sr.’s other assets and is divided equally among his two living children, Jonny and William. John’s grandchildren do not inherit anything.

  • Per stirpes distribution uses a generational approach. If a named beneficiary dies before you do, then the benefits would pass on to that person’s children in equal parts. Spouses are generally not part of a per stirpes distribution.
  • Per capita distribution, all members of a particular group receive an equal share of the distribution. Within a will or trust, that group can be your children, all your combined descendants, or named individuals. Under per capita, the share of any beneficiary that dies before you do is shared equally among the remaining beneficiaries. As a beneficiary designation, per capita typically means an equal distribution among your children.

Criticism of Per Stirpes

According to NoloPress, Per Stirpes is an old-fashioned term.  It is still frequently used but sometimes misused by attorneys.  In any case, rarely is it fully understood by willmakers. It’s intended to make sure that children inherit in the place of a deceased parent.  But, there have been many lawsuits surrounding the term with varying results over the years. Because of these variables, using per stirpes may have unpredictable or unintended consequences.

Creating a will is one of the most important decisions a person can make.  Unfortunately, it can also lead to unnecessary stress and confusion. The use of outdated terms such as per stirpes can 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.” It is seemingly trivial distinctions in a language like this that make all the difference in the courtroom. 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. (Source: investopedia.com)

Final Words

If you die without an estate plan in place, your property will pass on according to your state’s rules for intestate succession. In other words, the state in which you live will determine who gets what of your property and assets. Typically, State Code provides that your closest living relatives inherit from you.  Some states call for a per stirpes distribution system.  Some call for a per capita distribution system. It varies from state to state.

The only way to ensure that your property is passed along exactly as you choose is for you to create a will. This is a very good reason to create an estate plan if you haven’t already done so.  Particularly if you’re not in agreement with the way your state will automatically distribute your estate. Your will or living trust agreement supersedes state default intestate succession codes. In case you didn’t know, intestate means not having a will before you die.

Even if you’re unmarried and have only one child and no grandchildren, state law will intercede at your death if you don’t have an estate plan in place. If your child predeceases you, your estate will likely pass to more distant relatives, some of whom you might not have wanted to inherit from you. In a worst-case scenario, it’s possible that your estate could “escheat” to the state if you leave no living relatives. It is the case regardless of whether your state defaults to a per capita or per stirpes distribution system. (Source: thebalance.com)

Up Next: What are Bearer Bonds?

Bearer BondsBearer bonds are debt instruments issued by governments and corporations that are not registered to any owner. They’re unregistered as investment securities and completely anonymous.  As a result, no records exist that list the owners’ names. They are outlawed in the USA due to their use in illegal activities like money laundering and tax evasion.

They differ from traditional bonds in that they’re unregistered as investment securities.  As a result, whoever physically holds the paper on which the bond is issued is the presumed owner.  It gives them a greater measure of anonymity than more common bond offerings present. But, since no investor names physically appear on bearer bond papers, it’s nearly impossible to recover such bonds if they’re lost or destroyed.

Both bond types state maturity dates and interest rates.  However, bearer bonds have coupons for interest payments physically attached to the security.  They must be clipped or removed and then submitted to an authorized agent in order to receive payment. Bearer bonds aren’t issued in the U.S., having essentially been outlawed in 1982.  Nevertheless, some are still in circulation. If you inherit one, you can collect the value, and in some cases interest. Besides buying or inheriting bearer bonds, you can still get them in the foreign countries that allow them to be issued.

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