What is Per Stirpes?
Per stirpes is a stipulation in a will or trust which defines the hierarchial distribution of an estate. Under per stripes guidelines, if a named beneficiary predeceases, or dies before will's creator, or the testator, then the deceased beneficiary's share of the inheritance will go to the beneficiary's heirs. While the term per stirpes is common an individual's legacy under a trust or will, it may appear in the beneficiary statements for individual retirement accounts (IRAs), insurance, and other financial documents.
Per Stirpes Distributions
The term per stirpes comes from the Latin for “by roots” or “by branch” and indicates a division of estate property. Per stripes distributes the wealth under the basis of the family tree's branch on the death of a beneficiary. For example, everyone below a mother, such as her children and great-grandchildren, is included in a branch and will receive equal portions of the deceased beneficiary's share. Per stirpes define asset distributions so that each part of a family tree receives estate proceeds as specified by the testator or account owner’s wishes.
As an example, the creator of a will name their four siblings as beneficiaries. One of those siblings die before the testator but have three surviving children. On the death of the testator, the estate divides equally among the branches. Each of the living siblings receives one-quarter of the property. The children of the fourth beneficiary receive the final quarter of the funds, which splits equally between the three children.
Children may stand as representatives of their parents if a parent passes before the creator of the will. If there are no surviving children, the funds may flow to the next generation or grandchildren. The per stripes guidelines do not consider a spouse of the deceased beneficiary.
Differences Between Per Stirpes and Per Capita
Another method of distribution of an estate is per capita at each generation. Per capita means “by the heads” and may also appear as “share-and-share-alike.” Following per capita guidelines, estate proceeds have an equal division between the heirs of the same generation. Here, the property divides equally among surviving descendants and the children of any deceased descendants.
As an example, the creator of a will name their four siblings as beneficiaries. Two of those siblings die before the testator but have surviving children. On the death of the testator, the estate divides equally between the two surviving siblings and the children of the deceased siblings. Should the dead sibling not have heirs, the estate goes in equal portions to the two surviving beneficiaries.
The testator determines the groups and their children or grandchildren who will receive proceeds from the estate. Also, similar to per stripes, spouses do not receive consideration in the division of funds.
Real World Example
Tom is a widower with three children. He creates a will to divide his estate among his issue, or children, in equal per stripes shares. One of the children is deceased but has two children, Tom's grandchildren. Upon Tom's death, each of the surviving children receives one-third of the property. Tom's two grandchildren will receive and split the portion which was to have gone to their mother, had she survived. In the situation where one of his children married but died without children, the spouse will not receive any of the estates.