Mixing up terms at a dinner party?
Potato, Potato; Flamingo, flamenco— you’ll get a good laugh (depending on who you're having dinner with, of course).
But mixing up terms on an estate document when preparing your estate or interpreting the estate as the executor?
Definitely not the same outcome— only a deep well of frustration & regret with that.
Obviously a lawyer would help you avoid making any mistakes, but that doesn't always empower you to understand exactly what those stuffy documents mean or what the formal words actually mean... either way, it's always nice being able to understand what’s going on yourself.
And Per Stirpes vs. Per Capita is always a classic candidates for mix-ups, so let’s break them down.
What does Per Stirpes Mean?
Per Stirpes is a legal term for a type of inheritance distribution that basically means 'by the branch'.
What a per stirpes distribution aims to do is divide one's estate assets equally among each branch of heirs, typically meaning that heirs immediate family & heirs.
In a normal per stirpes arrangement, if a beneficiary passes before the person who made the will, the portion of an estate they are entitled to is instead split evenly between their heirs.
So if James makes a will with per stirpes designations, Jack is his only son, and Jack has two children, but Jack dies unexpectedly before James, then Jack’s two kids would get his share of the inheritance.
This is insurance to keep an inheritance properly split between branches of a family in case tragedy strikes.
But… you shouldn’t use per stirpes if:
- You’d rather name a whole new beneficiary if a particular one passes (e.g. a partner or non-blood relative)
- You want their share to go to the other beneficiaries (this is what per capita does).
What does Per Capita mean?
Per Capita is a legal term for a type of inheritance distribution that means “by the head” or “per person” (a.k.a literal 'headcount').
Unlike per stripe, per capita in a will or estate document means that if a beneficiary passes away before the will is executed, then their share would go to the surviving beneficiaries instead of anyone else.
So if there are three sisters and one passes before the parent who made the will does, then the deceased’s share would be allocated to the two remaining sisters.
What is the Difference Between Per Stirpes and Per Capita?
Both per stirpes and per capita are different stipulations you can put in a will as directions on what to do in the face of a tragic and early death of a beneficiary.
Per stirpes means that if a beneficiary passes away before the person who made the will, then their portion will automatically go to their immediate heir or heirs in equal amounts. Per capita means that the deceased’s beneficiary’s inheritance would instead be evenly split between the surviving beneficiaries.
How to remember the difference
Per Stirpes? Just think branch. Then think family tree. This should remind you that you drop down a branch on the family tree when using a per stirpes arrangement.
Per Capita? Just think of any stat that ends with “per capita” and remember that when people say that they mean individual, or per head. So a per capita split is just evenly distributed to other individuals!
Or just save this blog. That would work too.
Both per stirpes and per capita are ways to plan for unexpected events. Wills are made so people have direction when that person isn’t around anymore, so if you’re making a will, really think through all of the possible scenarios and be as thorough as possible to prevent any arguments or mistakes.
If you’re a beneficiary reading a will, respect the wishes of the will.
And if you’re an executor, make sure you have a solid understanding of the assets and how the deceased wanted things to be distributed — you have a fiduciary duty to get it right, and taking your time is important to avoid making any mistakes that could lead to arguments, or at worst, lawsuits.
That doesn’t mean you have to get a lawyer, although it’s often a good idea to get legal advice with any legal document. If you are completely lost after reading the will and have no idea who is supposed to get what and how much, well, that may be your answer.
Ah. By the way — here are a couple other things you may find interesting: