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What does per stirpes mean for your estate distributions?

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Jacob Wackerhausen/Getty Images

When thinking about your larger financial picture and estate strategy, it's essential to be clear about how you want your assets distributed. This includes considering circumstances in which your named beneficiary passes away before you or is unable to accept your assets.

Estate and financial documents commonly include phrases that aim to explain what should happen in these situations. Language such as "per capita" and "per stirpes" can clarify whether you would want that person's share to be divvied equally among other named beneficiaries or if you'd rather that share continue down the family line and go to that beneficiary's next legal descendants.

Per stirpes is usually considered the more complicated of those terms. Let's go through what it means, some examples and how it differs from per capita.

What does per stirpes mean and how does it work?

The phrase "per stirpes" comes from Latin (literally "by branch") and indicates that asset distributions should follow the "branches" of a family tree. So, if a named beneficiary is deceased or cannot accept the asset, it's given to their next living descendants.

In some cases, there is no remaining branch to follow or who's next in line is open for debate. An estate attorney is a great resource to assist you with your specific estate planning needs. They can work with you along side your financial advisor in the planning stages to anticipate your options.

The use of per stirpes isn't limited to wills and estate planning documents. You may be able to include the designation in trusts, life insurance, retirement accounts and other financial products and contracts.

Per stirpes examples in action

While no situation can be predicted perfectly, and legal professionals are the experts in interpreting how particular circumstances can play out fairly, here are some generalized cases that illustrate how per stirpes works. Please note these rules can vary by state and this is not an exhaustive list of examples.

Scenario 1: Children

Your two daughters and one son are your named beneficiaries for $120,000 in cash. Your son, who has two children, dies before you do. But his children and your two daughters are alive when you pass away. With per stirpes distributions, each of your two daughters would receive one-third ($40,000 each), and your late son's two children would equally split the third your son would have received.

Scenario 2: Siblings

You name your brother and sister as your beneficiaries for $120,000 in cash. In time, your brother has one child and no grandchildren, and your sister has one child and one grandson. When you pass away, both of your siblings and your sister's child have died. With per stirpes in effect, your brother's child would receive half, and your sister's grandchild would receive the other half.

Pros & cons of using per stirpes

As you consider including per stirpes in your estate plans, take note of potential benefits and drawbacks.

Potential advantages

  • Save time and simplify estate plan maintenance. As your family expands to include more grandchildren and great-grandchildren, you don't necessarily need to update your will with their names. Language such as "to my children, per stirpes" can ensure your assets pass down as planned.
  • Reduce disputes and relieve stress among family members. When distributions follow a clearly defined, straightforward path, fewer questions and concerns are likely to arise.

Potential drawbacks

  • Unequal inheritances for different family members. If your children die before you do and your estate passes to their children, your grandkids might not each get the same amount. For example, if your son had two kids and your daughter had three, your son's half of the estate is split between his two kids—so, each gets one-fourth of the total—and your daughter's half is shared among her three kids, with each getting one-sixth of the total.
  • Excluding some loved ones from distributions. If your child is married, has no kids and dies before you, their portion of your estate doesn't go to their spouse. Instead, it's equally divided among your other remaining beneficiaries. If your deceased child had stepchildren but did not legally adopt them, those kids won't receive anything.
  • Unknown people managing the assets for minors. If an inheritance passes to a minor, an in-law or other adult you didn't choose may be legally responsible for managing that child's assets until they reach adulthood.

Per stirpes vs. per capita

Per capita (Latin for "by heads") is another designation you can use to direct your estate's distribution. Unlike per stirpes, per capita ensures assets go only to named beneficiaries. So, if one of your three beneficiaries dies before you do, that person's share is divided equally among the remaining two. The deceased beneficiary's surviving children or grandchildren don't receive any shares of your estate.

You still can use per capita to leave money to multiple generations. For example, you could name as beneficiaries "all my children, grandchildren and great-grandchildren, per capita." Then, your estate would be equally divided among all those beneficiaries who are living at the time of your death.

Strive for clarity & seek insight

Whatever your wishes, make sure all the legal and financial documents connected to your estate describe them as clearly as possible. Insights from experts are invaluable in this area. As you lay out your plans, your financial advisor can work closely with you and your chosen legal and tax professionals to clarify your priorities for your loved ones.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

Hypothetical example is for illustrative purposes. May not be representative of actual results. Past performance is not necessarily indicative of future results.