The Difference Between Per Capita and Per Stirpes
I find that a number of my clients have heard the term “per stirpes,” but few actually know what it means (no, it’s not a disease). Even fewer have heard the term “per capita.” The legal community uses both short-hand terms to describe how your estate should be divided among your beneficiaries. They also remind everyone that lawyers love Latin. Let’s take a look at both.
“Per stirpes” is the traditional method, which is why it’s better known than “per capita.” It literally means “by branch” – what it tells everyone in the know is, if something should happen to one of your beneficiaries, you want their children to receive their share. So if you have two children and one of them dies, the deceased child’s fifty percent share is passed down to his or her kids.
“Per capita” is a newer method, so it’s not as well known. It means “by head” – each person gets an equal share with everyone else, regardless of where they are in the family tree. Taken literally, it means that if you have two children, and one of them dies, leaving three children behind, the estate is split into four equal shares: one shares to the living child and three shares to the three grandchildren. But most lawyers will use the expanded term “per capita at each generation” – in the above case, the living child will still get fifty percent, and the other fifty percent will go to the grandkids.
Now, some of you may have noticed that the outcome for “per stirpes” and “per capita at each generation” is the same in my example. That’s because only one child has passed. If both children were deceased, then the outcome would be different. Under “per stirpes,” if both children have passed, each set of kids gets fifty percent, regardless of how many there are. So, if there are three grandkids by one child and one grandkid by the other, fifty percent gets split three ways, and fifty percent goes to the one kid. Under “per capita at each generation,” all four grandkids get the same amount.
Confused yet? You’re not alone. To make this easier, I created a video with a diagram to keep track of it all. You can find it on the video page of my website. If you would like to discuss which method makes the most sense for you, please feel free to reach out to me at kaway@kawaylaw.com.
