The three primary methods of directing the distribution of assets to one’s heirs in a Will or Trust are: (1) Per Stirpes; (2) Per Capita; and (3) By Representation. In this post, we will attempt to understand the differences between these methods.
In general, Per Stirpes means that if a beneficiary dies before the maker of the Will or Trust, the distribution that was supposed to be received by that beneficiary passes directly to the heirs of that beneficiary. If the predeceased beneficiary does not have any heirs, then the remaining beneficiaries divide that share between themselves.
Per Capita means that if a beneficiary dies before the maker of the Will or Trust, the distribution that was supposed to be received by that beneficiary is instead received by the other Per Capita beneficiaries, and is not passed on to the heirs of the predeceased beneficiary.
In general, By Representation is similar to Per Stirpes in that if a beneficiary dies before the maker of the Will or Trust, the distribution that was supposed to be received by that beneficiary passes to the heirs of that beneficiary, and the beneficiaries divide the share of any predeceased beneficiaries who did not have any heirs of their own. It differs from Per Stirpes; however, in that instead of passing directly to the heirs of a predeceased beneficiary, the shares of all predeceased beneficiaries who have heirs are first combined and then divided equally among the heirs of all the predeceased beneficiaries. Accordingly, it equalizes the distribution received by each generation who receives a distribution.
The modern school of thought is that it is fairer for everyone at the same generational level to receive an equal share. This is reflected in the default rule in New York State, which provides that assets get distributed to heirs By Representation unless otherwise specified. Accordingly, if you wish to have your assets distributed Per Stirpes or Per Capita, that method needs to be specified in your Will or Trust.
It is useful to use examples to illustrate how these designations are similar and how they differ. To view an extended and illustrated version of this article, please click here.