Know the difference between ‘per stirpes’ and ‘per capita’

When making a will or designating beneficiaries, you can make bequests to your heirs on a “per stirpes” or “per capita” basis.
Per capita (by head) means your gifts will be divided evenly among your surviving beneficiaries. But if one of your beneficiaries dies, a per stirpes (by branch) designation means their inheritance will be passed on to their heirs.

Let’s assume you have two kids, John and Paul. John has one child and Paul has two. For easy math, let’s assume you have a $1 million estate.

Per stirpes. In your will, you stipulate your estate should be distributed to your “descendants, per stirpes.” If both John and Paul survive you, they will each receive half of the estate, or $500,000. But if Paul passes away before you do, Paul’s children will split his half of the estate.
Per stirpes is convenient in estate planning because you don’t have to update your will each time a child is born, or a beneficiary dies. Note that spouses of beneficiaries do not inherit under a per stirpes designation, unless specifically noted in the will.

Per capita. A per capita distribution is divided among surviving beneficiaries of the same generation. So, if you stipulate your estate should be distributed “per capita,” and John predeceases you, Paul will receive the entirety of your estate and John’s children would receive nothing.
However if both John and Paul predecease you, then their children would each receive an equal part. Since there are five grandchildren, each one would inherit 1/5th of the estate or $200,000.

A per capita distribution is a way to ensure that only the people you designate as beneficiaries receive shares of your estate. People may choose per capita when they want to limit which of their family members will benefit. However, you will likely need to update your plan more regularly to keep it current and consistent with your intent.

Designations for other accounts. You can (and should) make a per stirpes or per capita designation when naming beneficiaries for your life insurance, IRA, or other retirement accounts. If you don’t indicate your wishes, the account custodian will use their default option.

There is no one “right way” to distribute your estate. Choosing per stirpes or per capita can be complicated, especially if an heir predeceases you, an heir is a minor child, or there’s conflict down the family line. To be sure your wishes are honored as you intend, it’s important to speak with an estate planning attorney.

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