Estate distribution among beneficiaries can be handled in various ways, with each state providing a default method and estate planning attorneys utilizing multiple strategies to tailor distribution plans. These methods can be tricky to digest, however—especially since some of their names come from Latin and legalese can be difficult to understand. The common methods for estate distribution are per stirpes, per capita, and per capita at each generation (also called “by representation”). To make these concepts easier to slice up, we’ll use a pizza party as our guide—where our host (the decedent) decides how to divide the pies among the guests (the beneficiaries). The host will decide between cutting equal slices, reserving some for specific guests, or changing the size of the slices for certain partygoers.
Estate Distribution At The Pizza Party
Our generous host has planned a festive gathering for her eager guests, complete with stacks of piping-hot pizza boxes, each brimming with gooey cheese, savory toppings, and the irresistible aroma of freshly baked crust wafting through the air. Her initial guest list included her three children–Alice, Bob, and Charlie–each anxiously awaiting their turn to grab the biggest slice and argue over the last piece. But, on the day of the party, the guest list changes unexpectedly. Alice arrives on time and is ready to dig in, Bob also shows up as expected, but Charlie is absent. Meanwhile, Charlie’s two children—Dave and Emma—are waiting outside, hoping to receive a portion. Depending upon our host’s chosen distribution method and the family members who are present, the pizza may be dished out to different beneficiaries or in different proportions.
1. Estate Distribution By Family Branch: Per Stirpes
Per stirpes means “by roots,” “by branch,” or “by familial stocks” and describes a method of estate distribution wherein the estate is divided by each branch of the family tree. The host’s original intent was to allocate an equal slice to each child’s branch, thus, if one child is absent, that branch’s share is passed along to that child’s offspring.
Party Details: Preparing For The Estate Distribution
Alice and Bob are present and ready to enjoy their slices. Although Charlie is absent, his branch isn’t forgotten—Dave and Emma (Charlie’s children) receive his share in his stead.
How To Slice It: The Estate Distribution Process
First, the pizza is divided into three equal slices (33.33% each), one for each child’s branch. Alice gets her 33.33% slice. Bob gets his 33.33% slice. Since Charlie isn’t there, his 33.33% is split evenly between Dave and Emma (each receiving 16.67%).
Estate Distribution Summary
Per stirpes honors every branch of the family. Even though Charlie did not attend the party, his offspring are provided for, ensuring that the host’s original intent of including each child’s family is fulfilled.
2. Estate Distribution Direct To The Living: Per Capita
Per capita means “by heads” and treats the beneficiaries equally, regardless of generation.
Party Details: Preparing For The Estate Distribution
In our original scenario, Alice and Bob are present and Charlie is absent, leaving Dave and Emma (Charlie’s children). All four individuals–Alice, Bob, Dave, and Emma–are considered beneficiaries on equal footing, regardless of whether they are the host’s children or grandchildren.
How To Slice It: The Estate Distribution Process
The pizza is divided equally between the surviving beneficiaries. Alice, Bob, Dave, and Emma each receive 25%.
Estate Distribution Summary
Per capita distribution ensures that all living beneficiaries receive an equal share, regardless of their generational position. Unlike per stirpes, which preserves family branches, per capita treats all beneficiaries as individuals rather than as part of a lineage. This method can be beneficial for those who want fairness among all heirs, but it may unintentionally disinherit grandchildren if all direct children survive. For example, if all three of the host’s children were present at the party, Dave and Emma would receive nothing. It can also “dilute” the first generation’s shares with each additional beneficiary from a later generation who inherits. This can create challenges in estate planning when balancing fairness with long-term family expectations. It’s important to consider these nuances when deciding how to structure an estate plan to ensure that assets are distributed according to one’s wishes.
3. A Modern Twist On Estate Distributions: “By Representation” Or “Per Capita At Each Generation”
Per capita at each generation or “by representation,” combines the tradition of per stirpes with a modern twist that ensures fairness when a branch is absent. The method pools the shares of absent beneficiaries and redistributes them among the representatives of those branches. This is the default method in Arizona (where the author lives), as well as other some other states.
Party Details: Preparing For The Estate Distribution
Let’s adjust the scenario slightly. Our host has three children: Alice, Bob, and Charlie. Alice is present, but both Bob and Charlies are absent. Bob has two children, Ben and Bella. Charlie has one child, Camille.
How To Slice It: The Estate Distribution Process
The pizza is first divided into three equal portions (33.33% each) for the three children’s branches. Alice’s branch gets its full 33.33% since she is present. The combined share for the absent branches (Bob and Charlie) totals 66.66%. This share is pooled and then divided equally among all representatives: Ben, Bella, and Camille. Thus, Alice receives 33.33%, while Ben, Bella, and Camille each receive 22.22%.
Estate Distribution Summary
This method ensures a fair redistribution among the representatives of absent branches. It takes into account modern family dynamics by allowing multiple representatives to share an absent parent’s intended portion, rather than adhering strictly to the original branch percentage. It also ensures that each individual from a generation is treated equally, regardless of how many (or how few) siblings they may have.
Final Thoughts On Estate Distribution
The estate distribution method you choose to “slice the pizza” can have significant implications. The per stirpes method honors every family branch by ensuring that even absent children’s descendants receive their intended share. Per capita treats all named beneficiaries equally, regardless of their generational position. Finally, per capita at each generation (or “by representation”) offers a modern and balanced approach by pooling and redistributing shares among representatives of absent beneficiaries. Your estate plan must clearly define who should receive what portion of your legacy, otherwise the default provisions in your state may apply. By understanding these distinctions, you can ensure that your wishes are carried out exactly as intended, leaving every guest—or beneficiary—satisfied with their slice.
Read the full article here