Per Capita vs Per Stirpes & Right of Representation
The legal world is full of Latin phrases used to describe or name legal concepts that often shed little to no light on what the concept means. The most common examples we receive are in the form of questions, "What is Per Stirpes? What is Per Capita? What does Right of Representation Mean?" Yes, that last one is not Latin, but these 3 questions are always lumped together when discussing our clients' distribution plans in their wills and trusts. Below, we'll explain each to demystify the process.
Before we begin, we'll use the same example distribution, with some visuals, for each concept so you can really understand the difference between everything. In our hypothetical distribution, we have a mom, named Connie. Connie has 3 children: Cara, Russ, and Susan. Susan, however, predeceased her mom, Connie, meaning Susan died before mom. Susan has 2 children of her own, Gabby and Austin.
Per Stirpes and Right of Representation
Let's begin with Per Stirpes and Right of Representation because they actually mean the same thing when it comes to an inheritance. If Connie were to distribute her assets per stirpes, or by right of representation, then each of her children - Cara, Russ, and Susan – receive a 1/3 share. However, remember, Susan passed away before Connie and left 2 children. Under per stirpes, right of representation, Cara and Russ still receive 1/3 each, but Susan's children share in Susan's 1/3 share equally. Susan had 2 children, Gabby and Austin, therefore they each receive 1/6 of Connie's estate.
Per Capita
Now let's contrast that with per capita distributions. Under per capita, every beneficiary will share in the estate equally. Going back to our example, as Susan passed away before Connie, Connie now has 4 total beneficiaries: her children Cara and Russ, and her grandchildren Gabby and Austin. As per capita means equal to all beneficiaries, Cara, Russ, Gabby, and Austin each receive the same inheritance share: ¼, or a quarter each.
An easier way to think about the matter is that per stirpes right of representation ties the percentage share of Connie’s childrens’ shares to how many children Connie has, while per capita ties this percentage share to how many beneficiaries Connie has at her death.
Per Capita at Each Generation
As a bonus, there is also the concept of per capita at each generation. Personally, the only time we've seen this type of distribution was back in law school, but it is a potential choice. Under per capita at each generation, when you distribute your assets and a child predeceases you, shares are determined by the number of descendants at each level. To illustrate this, we'll use our same example with Connie and her family but take it a step further and say that Cara also passed away before Connie and left one child, John. In this situation, Connie has one living child, Russ, and 3 living grandchildren, Gabby, Austin, and John.
Under per capita, everyone receives a 1/4 share as there is 4 beneficiaries. However, under per capita at each generation, the equal sharing based on the number of beneficiaries only occurs at each generational level. Connie's children would each share 1/3, but since only Russ is alive at Connie's passing, Russ still receives his 1/3 share. The remaining 2/3 that would have gone to Cara and Susan are now to be shared, per capita, among their children equally, Connie's grandchildren. This means that 2/3 share is split equally between Gabby, Austin, and John at a 2/9 share each. Hopefully your executor or successor trustee enjoys fractions if you use one of these distribution plans.
Remember, when designing your estate plan, whether it be your will or trust, you have a lot of flexibility to design your distribution plan how you would like. These are just some examples of more straightforward distributions with deeply rooted histories. Additionally, it is often best practice to have either right of representation or per capita distributions for residual shares of your estate – the shares that either you don't designate for specific beneficiaries or where designated beneficiaries pass away before you.
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