Per Stirpes vs. Per Capita: What’s the Difference?

Article Summary:

Per stirpes and per capita are two different ways of distributing assets in a will. Per capita evenly divides an estate among the surviving beneficiaries, while per stirpes allows assets to pass to the next generation if a beneficiary has already passed.

Estate planning is one of the most critical pieces of the financial planning puzzle. One of the most common estate planning documents you’ll need is a will, which is where you’ll lay out what you want to happen to your assets when you pass away. When you write your will, you’ll have the opportunity to decide how you want your assets distributed to your beneficiaries. The two most popular options are per stirpes or per capita beneficiary designations.

While they sound similar, there are key differences between the two terms that must be considered. We’ll cover these differences extensively in this article.

What does per stirpes mean?

Per stirpes is a Latin phrase that means “by branch” or “by class.” When used in a will, it describes what should happen to someone’s assets if one of their beneficiaries predeceases them. When a will dictates a per stirpes distribution, if a beneficiary passes away before the grantor (the person who made the will), then that beneficiary’s share of the estate will pass along to the heirs of their deceased parent.

A per stirpes distribution allows all assets to follow the same family branch they were originally intended for. Suppose a parent dies and leaves their assets to their adult children. If one of their beneficiaries had already passed, their share of the estate would instead pass onto their heirs, keeping the assets in the family line.

It’s important to note that for the purposes of a per stirpes distribution, spouses aren’t considered heirs. So if a beneficiary had predeceased the grantor, their assets wouldn’t pass to their spouse, as they are not technically a part of the family line.

Should I put per stirpes on my beneficiary form?

If you want to ensure your beneficiaries’ heirs receive a part of your estate, then you may wish to include per stirpes distribution in your will. However, it’s ultimately your choice how you would like your assets distributed when you die.

What is an example of per stirpes?

Suppose John Smith is writing his will to distribute his assets among his heirs. John has three children, Eric, Adam, and Mary, each of whom has two children of their own.

  1. All beneficiaries are still living. Even under a per stirpes agreement, Eric, Adam, and Mary each receive a third of John’s assets and estate.
  2. Beneficiary predeceased. By the time John passes, Adam has already predeceased him. With a per stirpes distribution, Adam’s share of the estate would instead pass to his two children. Eric and Mary would receive one-third of John’s assets each and Adam’s two children would receive one sixth each.

What does per capita mean?

Per capita is a Latin phrase that means “by head.” Like per stirpes, per capita in a will describes how assets pass down to beneficiaries. When a will includes per capita distribution, the assets are distributed only among the living descendants.

So if one of the beneficiaries had already passed away, their share of the assets would simply be divided evenly among the other beneficiaries listed in the will. As a result, that person’s heirs would only receive any of the estate if they had already been listed as beneficiaries in the will.

What does per capita mean as a beneficiary?

For a beneficiary, per capita means your share of an estate will only be passed to your family if you are alive to receive it. If you pass away before the person whose will you are listed in, your heirs won’t get a share of their assets.

What is an example of per capita?

Let’s revisit John Smith and his children Eric, Adam, and Mary.

  1. All beneficiaries are still living. In this situation, Eric, Adam, and Mary would each receive a third of the estate under a per capita agreement.
  2. Beneficiary predeceased. Adam passes away before his father, John Smith. Then the estate would be divided equally between his siblings Eric and Mary. Even though Adam left behind two children of his own, his children would not inherit his share unless they were specifically named in the will.

How can I better plan ahead?

Estate planning is one of the most important steps of preparing your financial plan. This is especially true if you have considerable assets, or if you want to care for your heirs after you pass.

However, that’s not the only piece of the puzzle. Another critical part of estate planning is ensuring you have the right life insurance in place to protect your loved ones if you pass away. Make sure you compare multiple providers before ultimately deciding on a plan.

Per stirpes vs. per capita: Which is better?

When comparing per stirpes and per capita distribution, there isn’t necessarily one option that’s better than the other. Instead, it comes down to who you want to benefit from your assets when you pass.

If you have a multi-generational family with grandchildren or great-grandchildren, you may wish to opt for the per stirpes beneficiary designation. That way, if one of your children dies before you, their children will still receive some of your assets, if that was your intention.

However, not everyone wants their estates passed down to future generations. You may decide that you only want your direct descendants to benefit from your estate. In that case, you could choose per capita distribution.

Don’t forget the generation-skipping transfer tax (GST)

Generation-skipping transfer tax is something to remember when comparing per stirpes vs. per capita. Leaving money to grandchildren can trigger this type of gift tax if you have a large estate. The generation-skipping transfer tax is a federal tax that is triggered when a gift or property is transferred to someone who is at least 37½ years younger than the donor. This is only an issue for wealthy families since as of 2022 there is a lifetime GST exemption of $12 million.

Per stirpesPer capita
Supports younger generations of your family when one of the beneficiaries is not around to receive an inheritance.Equally divided among beneficiaries
Beneficiary’s share passes to their lineal descendants if the beneficiary dies before the inheritance vests.Only goes to the beneficiaries listed, if living.

What if I’ve already planned for my grandchildren?

Suppose your estate plan includes the creation of a trust for each of your grandchildren. After those trusts are funded, the remainder of your estate will go to your children. Since you’ve already arranged for assets to go to the next generation, it might make sense for the remainder of the assets to pass per capita, meaning each of your children receives an equal share.

Pro Tip

If you aren’t sure whether per stirpes or per capita distribution is right for your situation, consult an experienced and knowledgeable estate planning attorney who can offer insight and help draft your estate planning documents.

Which should I pick for my IRA account beneficiary, per stirpes or per capita?

It’s entirely up to you whether you choose per stirpes or per capita for your individual retirement account (IRA) assets. Selecting per stirpes would distribute your IRA account to the children or descendants of your beneficiaries equally. Per capita would distribute the deceased beneficiary’s share equally among the remaining beneficiaries.

If you have several generations in your family, you may wish to choose per stirpes distribution to ensure all generations benefit. On the other hand, if you only want your direct descendants to receive a share of your estate, then you may prefer the per capita option.

Key Takeaways

  • Per stirpes and per capita are both used in estate planning in reference to how someone’s assets will be distributed.
  • Using per stirpes distribution, if a beneficiary has predeceased the writer of a will, then that beneficiary’s share of the estate will be passed down to their own heirs.
  • Per capita distribution means that the estate is distributed among the remaining beneficiaries. If one has already passed, their share of the estate is divided equally among the rest.
  • If you aren’t sure which is right for you, consider consulting an experienced estate planning attorney.
View Article Sources
  1. What is a per stirpes designation? — U.S. Office of Personnel Management
  2. § 64.2-202. Code of Virginia — Commonwealth of Virginia
  3. Combat-Related Special Compensation (CRSC) — U.S. Department of Veterans Affairs
  4. Family Trusts — SuperMoney
  5. What Happens If You Inherit a House With a Mortgage? — SuperMoney
  6. How to Pay for a Lawyer When You’re Short On Cash — SuperMoney
  7. What Are The Different Types of Life Insurance? — SuperMoney
  8. Best Life Insurance | March 2022 — SuperMoney