Are you confused about the terms being used in estate planning documents? We understand and we agree! The legalese is a lot, and often the legalese is Latin. Today we’re going to break down two common estate planning terms—Per Capita and Per Stirpes Inheritance – that just happen to be Latin– to help you make sense of two of your options when it comes to asset distribution.
Per Capita
Per capita is a Latin term that means “per head”. Think of it as passing out inheritances per the head of each living child you have. On the surface, it may seem like exactly what you want to do, but let’s unpack it a little more.
When you distribute assets per capita you are distributing the assets to your living descendants in equal amounts.
So, if you have three (3) children and the plan is to distribute to them equally after your death, you may feel this is the right choice, and it’s possible it is. If each descendant is living, everything will go exactly as you wish. The assets will be distributed equally among your descendants.
Where it gets tricky is if one of those descendants predeceases you. Let me offer the same scenario, but in the tragic event that one of your children passes away before you. In this situation, the two living children will receive equal portions of the assets— including the portion that was supposed to go to the deceased child. That deceased child’s portion will be added back into the larger pot of assets and split equally between the two living children. The descendants of the deceased child are not accounted for in the per capita distribution.
Per Stirpes
Per stirpes, no we didn’t misspell stripes, is another Latin term which means “per branch”. So, think of this as passing out inheritances to the head of each branch of the family tree. This type of distribution takes into consideration the possibility that a descendant may predecease their parent.
In this type of distribution, using the same scenario where you have three children and want to split the assets equally, we’ll discuss how distribution works.
In the event the three children are all living at the time of your death, the distribution is exactly the same. Each child receives an equal portion of the assets— just as they would per capita.
But, if one of the three children were to predecease you, the per stirpes distribution acts very differently. With the per stirpes distribution the two living children will receive 1/3 each, as you intended, but the deceased child’s 1/3 inheritance moves down their family line, or branch of their family tree, and is distributed in equal shares to their descendants, your grandchildren.
Per stirpes accounts for the future generations, or the branch of the family tree.
So, which is better? Per capita? Or per stirpes?
The great majority of estate plans we work on use per stirpes distribution. But there are instances where that may not be the best choice for you. Some include estrangement from the next generation, grandchildren with substance abuse, or concerns about the deceased child’s widow/widower and the proper use of the funds. These issues can be sidestepped with proper estate planning— be that the use of the per capita distribution method, or the use of Trusts to protect your legacy.
In the end, it’s very important to weigh your options with a skilled professional who can outline the pros and cons of each scenario, and provide tools to work around common pitfalls and issues within estate planning.
Commonly Asked Questions About Per Capita and Per Stirpes Inheritance:
What is the order of inheritance in Georgia?
In Georgia, the order of inheritance typically follows intestate succession laws, prioritizing spouses, children, parents, siblings, and more distant relatives, depending on the absence of a will and familial relationships.
What is the difference between inheritance per capita and per stirpes?
Inheritance per capita distributes assets equally among all living heirs, regardless of their relationship to the deceased. In contrast, per stirpes divides the estate among branches of the family, passing down shares to descendants if an heir has deceased.
What is the downside of per stirpes?
One downside of per stirpes inheritance is that it may lead to unequal distributions among heirs within the same family branch. Additionally, complexities can arise if heirs predecease others or if their descendants are difficult to locate.
What is the law of descent and distribution in Georgia?
The law of descent and distribution in Georgia governs the inheritance of property when a person dies without a valid will. It outlines the order of priority for distributing assets among relatives based on familial relationships and legal statutes.
We know that your family legacy is important to you, and we know the tools to help you take care of your loved ones long after you are gone. Call us at (404) 736-6066 or visit our website to schedule a consultation.
