When creating an estate plan, the main decision is how your assets will be distributed after you pass away. Understanding "per stirpes" and "per capita" distribution is key to that decision.
The terms "per stirpes" and "per capita" become important when your descendants include children and grandchildren. In a will, these terms are often written as "I leave my [fill in the blank] to my descendants, per stirpes (or per capita)."
Distributing your assets per stirpes (sometimes called "by right of representation") means that your assets will be divided evenly among your children, but if one of your children predeceases you, their children (your grandchildren) will inherit their parent's share. For example, Connie has three children, Cara, Russ, and Susan. When Connie dies, Cara, Russ, and Susan each inherit a one-third share of Connie's estate. However, if Susan dies before Connie, Susan's two children, Gabby and Austin, will inherit Susan's one-third share. The distribution would be: One-third to Cara, one-third to Russ, one-sixth to Gabby, and one-sixth to Austin.
In Tennessee, the terms "per stirpes" and "by right of representation" are used interchangeably.
When you distribute your assets "per capita" and a child predeceases you, your living children and grandchildren will inherit equally. So, in the first scenario above where daughter Susan dies, leaving grandchildren Gabby and Austin, Gabby and Austin would inherit an equal share to children Cara and Russ. The distribution would be: one-fourth to Cara, one-fourth to Russ, one-fourth to Gabby, and one-fourth to Austin.
We have had clients whose existing estate plans (not drafted by us) were written this way, but when we discussed it with them, we learned that is not what they intended. They did not intend for their grandchildren to inherit anything unless the grandchild's parent predeceased them. That called for amending their wills and trusts to accomplish their goals.
Per Capita at Each Generation
When you distribute your assets "per capita at each generation" and a child predeceases you, shares are determined by the number of descendants at each level. So, in the example if both daughters Susan and Cara died, leaving grandchildren Gabby and Austin (Susan's children) and John (Cara's child), surviving on Russ would inherit one-third (based on three children in that generation, even though two are deceased) and the three grandchildren would inherit 2/9ths each (the two-thirds remaining share divided into three equal shares).
These terms can make a big difference in how an estate is distributed, and states have differences in how they interpret the terms.
Make sure your property is being distributed the way that you want by making an appointment with our Crossville, Tennessee office (931-250-8585) to have your existing estate plan reviewed.
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