Per Stirpes v. Per Capita: What's fair is fair; or is it?

The other day I was talking to a fellow attorney about estate planning.  As a litigator, he doesn’t generally work with wills or other estate documents.  He told me that he would love to have me draft his will and would refer all his friends to me if I could just explain one thing that has plagued him since law school – "what does per stirpes mean?”

If you’ve ever read a will or listened to a bunch of estate planning lawyers talk over coffee, you’ve probably seen or heard the terms per stirpes and per capita.  They are both used in explaining how you would like to divide your estate among your children and other descendents after you pass.  

Per Capita is a Latin term that literally means “by the head”.  When you die, all of the living members of the group you identified (e.g., “my children” or “my descendants”) will receive an equal share.  If one is deceased, he will not receive a share.

Per Stirpes is another Latin term that means “by the roots”, or more usefully “by representation”.  When you die, all of the original members of the group you identified (e.g., “my children”) will receive an equal share.  If one is deceased, his children stand in his shoes and split his share.

Most people think dividing their estate among their children is easy….”I have 3 children, and they each get a third.”  While that may work fine most of the time, what if something unfortunate happens and one of your children predeceases you?  And, what if that child had children of her own?  Should your grandchildren by that child receive her third in her place?  Let’s look at some examples:

Basic Assumptions:
--You are widowed or unmarried (just to keep it simple for today)
--You have 3 daughters
--Daughter 1 has 1 child; Daughter 2 has 2 children; and Daughter 3 has 3 children

Example 1:
When you pass away all three daughters are alive.  If your will left your property “to my children, per capita” each child receives 1/3 of your property.  The same is true if your will left your property “to my children, per stirpes”.  Because all 3 daughters are alive, both methods achieve the same result.

Example 2:
Daughter 3 predeceases you.  She had 3 children of her own.
“Per Capita to my children”: Only 2 shares are created because you now only have 2 children, so Daughter 1 gets ½ and Daughter 2 gets ½.  The children of Daughter 3 get nothing.
“Per Stirpes to my children”: 3 shares are created because you originally had 3 children.  Daughters 1 and 2 each get 1/3 and the children of Daughter 3 share her 1/3.

Example 3:
Daughter 3 predeceases you.  She had 3 children of her own.
“Per Capita to my descendents who survive me”: The group we are concerned with in this example is your descendents (so, your children and grandchildren).  There are 8 descendents living when you pass away (your 2 remaining children, and your 6 total grandchildren), so there are 8 shares created.  Each gets 1/8.  By using “my descendents” as the defining language, your grandchildren all share equally with your remaining children.
“Per Stirpes to my descendents who survive me”: 3 shares are created because you originally had 3 children and at least one of those children still lives.  Daughters 1 and 2 each get 1/3 and the children of Daughter 3 share her 1/3.

Neither per stirpes nor per capita fit every situation.  For example, in Example 3 when dividing your estate per capita to your descendants the family line led by your third daughter (the one with 3 children of her own) gets more than the other 2 family lines because there are more people in that line.  She and her 3 children get a total of 4 shares whereas the line led by Daughter 1 only gets 2 shares (1 for the Daughter and 1 for her only child).  So, it pays more for your children to have more kids! 

But, if you do the split per stirpes and assume that both Daughter 1 and Daughter 3 have predeceased you, then Daughter 1’s child gets Daughter 1’s 1/3 share, but the children of Daughter 3 all have to share her 1/3.   Under that setup, the Daughter 1’s child gets more than her cousins (your other grandkids) because she happens to be an only child.  Which is more fair?  Only you can decide what is right for your family.

Maryland follows the per stirpes approach because even if it doesn’t fit all situations, it comes close for most families.  Careful estate planning can ensure that your wishes with regard to your actual family situation are carried out and not left to Maryland’s default rule.

So, Michael, do you understand per stirpes now?