When planning your estate and designating beneficiaries, it’s important to understand how assets will be distributed if a beneficiary predeceases you. This is where terms like “per stirpes” and “per capita” come into play. These terms refer to different methods of dividing your assets among your heirs, and understanding the difference can help ensure that your estate is distributed according to your wishes.

Per Stirpes (By Family Branch)

The term “per stirpes” translates to “by branch” and is used to divide assets by family lineage. Under a per stirpes designation, if a beneficiary predeceases you, their share of the inheritance will be passed down to their descendants (i.e., their children). This method ensures that each family branch receives an equal share of your estate.

Example:
Let’s say you have three children, and one of them predeceases you, leaving behind two children (your grandchildren). If your will or trust specifies that your assets are to be distributed per stirpes, your three children would each receive an equal share. The child who has passed would have their share passed on to their children (your grandchildren), effectively splitting that portion of the inheritance between them.

Per Capita (By Individual)

On the other hand, “per capita” means “by individual.” In this case, if a beneficiary predeceases you, their share is divided equally among the remaining beneficiaries, rather than being passed down to their descendants.

Example:
If your will or trust specifies that your estate is to be distributed per capita and one of your beneficiaries predeceases you, the remaining beneficiaries will receive an equal share of the estate. For instance, if you have three children, and one of them passes away, the remaining two children will each receive half of the total estate, instead of the share being passed down to the deceased child’s children.

Why It Matters

The choice between per stirpes and per capita can have a significant impact on how your estate is distributed. If you want to ensure that your assets are divided equally by family branches (so that your grandchildren or other descendants receive a portion of the inheritance if a parent predeceases you), then per stirpes is the appropriate choice. However, if you prefer that the assets be divided equally among the remaining living beneficiaries (with no inheritance going to descendants of predeceased beneficiaries), per capita is the better option.

Understanding these distinctions can help you make more informed decisions about how your assets will be distributed and ensure that your wishes are honored after your passing. Always consult with an estate planning professional to ensure that your beneficiary designations reflect your intent.