Choosing Between Per Stirpes and Per Capita in Estate Planning

You may have heard or read the legal terms “by representation,” “per stirpes,” or “per capita” when researching estate planning. These terms may sound like irrelevant legal jargon, but they are very important when deciding how you would like your assets to pass to your loved ones when you die. If you do not understand the difference between them, you may choose the wrong method of gifting and create unintended consequences for your beneficiaries.

The meaning of these terms is critical when your child or beneficiary predeceases you. For instance, if your child passes away, the gift you were leaving to them could then go to your grandchildren, depending on the method you choose. If more than one of your children or beneficiaries predecease you, the terms “by representation,” “per stirpes,” and “per capita” will determine how the assets will pass to all of your remaining children and grandchildren.

Before you decide to create your will or a living trust and gift your assets, it is important to understand the different ways beneficiaries are able to receive their inheritance. Using the correct terminology makes certain they inherit the way you intended. Hiring a NY Estate Planning Attorney can ensure the proper administration of an estate.

By Representation (New York Default Provision)

“By representation” is the default New York provision. Unless you specifically choose a different method of distribution in your will or trust, your assets are automatically distributed according to the “by representation” method.

What to Expect

The predeceased beneficiaries’ shares of the same generation are divided equally between all their children.

Example: Tom has three children, Mark, John, and Anthony. Mark has two children, John has one child, and Anthony has five children. John and Anthony predeceased their father, Tom. Tom’s will states that his assets pass equally to his children and to their children “by representation.” When Tom dies, the estate is divided between Mark, John, and Anthony’s families. Mark receives one-third of his estate, and John and Anthony’s children (6 in total) will all split the remaining two-thirds of the estate equally.

Per Stirpes

“Per Stirpes” means that the beneficiary with the closest familial relationship to the decedent will receive an equal share of the decedent’s assets.

Example: If you leave your child all your assets, and your child predeceases you, your child’s children (your grandchildren) share the inheritance that your child would have been entitled to if still living.

Per Capita

“Per capita” means that the beneficiaries share the distribution of the gift based upon the number of beneficiaries who are living at the time of the decedent’s death. If any of your beneficiaries predecease you, their share will not transfer to their descendants, only to the remaining surviving beneficiaries.

Example: Tom has four children. One of his children predeceases him, leaving two grandchildren. Tom’s will leaves his estate to his children per capita. When Tom dies, his three children who survived him will share equally in the distribution of his estate. The children of Tom’s predeceased child (his grandchildren) will not be entitled to inherit their deceased parent’s share.

Don’t Forget Estate Taxes

When gifting assets to children and their descendants, it is important to consider whether you will be subject to a generation-skipping transfer tax. In order to avoid any unnecessary estate taxes and ensure your wishes are truly honored, it is crucial to speak with an experienced NY estate planning attorney.

If you are thinking about estate planning and how your decisions will impact your beneficiaries, consult with the experienced estate planning attorneys at Russo Law Group, P.C. We can review an existing will or estate plan or create a new one to include the correct legal terms to carry out your legacy as intended. Contact us or take advantage of our free seminars and webinars to learn more about how Russo Law Group, P.C., may assist you with estate planning that results in accurate administration of an estate.