When drawing up estate documentation, one of the most important questions is how do you want to leave your property to your heirs? A typical approach is to first name a spouse as the primary beneficiary, and then children or other heirs would inherit any remaining estate after the spouse’s passing. After the primary beneficiary, you might name children or other family members as the secondary or tertiary beneficiaries.
But what happens if a beneficiary predeceases you? There are three kinds of beneficiary designations to know about: per stirpes, to children per capita, and to heirs per capita.
“Per stirpes” is Latin for “by branch”. It sometimes may also be referred to as “by representation” or “by the roots”. If you choose this option, each beneficiary receives an equal share. If a beneficiary is already deceased but has children still living, those children receive their parent’s share in equal divisions. This option is the most common designation.
Here’s a scenario: Tom has three children – Mary, Sam, and Bob. Each child has children as well. When Tom passes, Mary is already deceased, leaving behind two children of her own. In this case, Tom’s estate would be divided equally between the three branches of his children with one-third going to each branch. Mary’s two children would receive her share equally, with one-sixth to each, and Tom’s two living children would receive one-third each. So Tom’s grandchildren would receive an inheritance in this case, with his own children receiving equal shares.
“Per capita” means “by head” in Latin. This option means that each “head” counted receives an equal share of the inheritance. However, it is extremely important to specify if the designation is to children per capita or to heirs per capita. It may not sound like a big difference, but in fact it could have enormous consequences for your beneficiaries.
If you leave your estate to your children per capita, this means that your living children and only your living children receive anything from the estate. To return to the scenario of Tom, he has three children and all three children have children of their own. However, one of Tom’s children, Mary, is already deceased upon his passing. Tom chose to leave his estate to his children per capita. Sam and Bob would then split the entire estate equally between themselves. Mary’s children would not receive her share of the estate in her place.
On the other hand, leaving an estate to heirs per capita creates a different situation. In the same scenario with Tom and his children above, Mary’s children would become beneficiaries. In this case, the estate would be split equally between all heirs: Tom’s two living children, Sam and Bob, and Mary’s children.
When considering how you want to leave your estate to your heirs, it is very important to determine how you want your heirs to inherit the property you may leave behind. If you are uncertain or have any questions, it would be best to consult an attorney.