When you sit down with your estate planning attorney to create your estate plan there will be numerous decisions you must make as part of your plan. One of those decisions is whether or not you want your beneficiaries to inherit per stirpes or per capita. Of course, in order to make that decision you need to understand what per stirpes and per capita mean.
The law continues to use a number of words and phrases that would be considered antiquated if used in everyday speech. Moreover, many of those words are Latin, making them even more difficult to understand. Both per stirpes and per capita are perfect examples. Both terms are used when referring to the distribution of estate assets to future generations. The reason it is important to understanding the difference between the two phrases is that there is typically a significant difference in how your assets are distributed when using per stirpes versus per capita.
“Per stirpes” means “by the root” or “by stock” in Latin and is the more commonly used method for distributing estate assets. When per stirpes is used the descendants of a beneficiary will inherit the beneficiary’s share should the beneficiary predecease you. Per capita, Latin for “by the head”, distributes your estate by counting the “heads”. Everyone in the line of distribution gets an equal share.
By way of illustration, let’s use a couple of examples to see how an estate would be divided using per stirpes and per capita. Assume that Bob has three children, Sue, John, and Mary. Mary also has two children, Ellen and Mark. Bob has an estate valued at $1 million at the time of his death. Assume that Sue, John, Mary, Ellen and Mark are all alive when Bob dies. If Bob’s estate is distributed using a per stirpes formula, Sue, John, and Mary would each receive one-third of the estate, or approximately $333,333. Ellen and Mark will receive nothing. If, however, Mary predeceased Bob her share would pass on to Ellen and Mark. Therefore, Sue and John would still receive $333,333 each and Ellen and Mark would split Mary’s share, giving them approximately $166,666 each.
If Bob’s Will stated that the estate was to be distributed per capita the results would be different. Assuming that everyone survived Bob, each descendant would receive an equal share, or $200,000. If Mary predeceased Bob, each remaining descendant’s share would be increased accordingly. Therefore, Sue, John, Ellen, and Mark would receive $250,000 each.
As you can see, a single word can dramatically change your estate plan. If you have additional questions or concerns about your estate plan, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.
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