What is the Meaning of Per Stirpes? Part 2
In last week’s blog post, I explained the term “per stirpes”, which is typically found in a last will and testament. It is meant to cover the possibility that the person who I name in my will to receive a bequest has died before me. As I explained last week, the term is Latin and means “by branch”. If I leave $50,000 to Person A who has two children and dies before me, and if I have designated that bequest to be made “per stirpes”, it means that A’s children step up and split that bequest. They each receive $25,000.
I could, however, also choose another designation, “per capita”. Per capita is also a Latin term meaning “by the head” or “by representation”. Property is to be divided into as many equal shares as there are surviving descendants in the generation nearest to the designated person and deceased descendants in the same generation who left surviving descendants. The people in the nearest generation get a share and then the descendants in the next generation split the rest.
Looking at an example of this, let’s say I had 4 children, A, B, C and D. A and B survived me but C and D died before me. C has 2 children, E and F. D has 1 child, G. By representation means that a bequest is divided into as many equal shares as there are surviving descendants ( A and B) and deceased descendants (C and D) who left surviving descendants (E, F and G). A and B would receive a 1/4 share. The remaining shares (1/2) would be split equally amongst E, F and G so that each would receive a 1/6 share. This is very different than a per stirpes designation which would result in E and F receiving 1/8 each and G receiving a 1/4 share.
We see this issue come into consideration when discussing with clients what would happen if their children pass away before them and each child does not have the same number of children (ie. grandchildren of our clients). Do they want to treat gifts to grandchildren equally or simply allow the grandchildren to “step into the shoes of their parent” and split that share? While most people prefer to distribute equally amongst their children so that grandchildren will simply split their parent’s share, a minority of clients prefer the per capita option.