One of the more important issues you’ll have to face as you create an estate plan is what you want to do about the inheritances you leave to others. In deciding on inheritances, you might come across some obscure terminology. For example, the terms “per capita” and “per stirpes” may not sound familiar to you, but you need to understand them if you want to understand inheritances.
Testate and Intestate Inheritances
When you consider inheritances, you have to look at the difference between testate and intestate distributions. A person who makes a will or trust can choose the inheritances he or she wants to leave behind. This person is called a testator.
On the other hand, someone who dies without leaving behind a will or trust dies intestate. In this situation, the laws of the state of California determine who inherits the property left behind by that person.
In both testate and intestate inheritance situations, the property can be distributed per stirpes or per capita. However, only in a testate inheritance disctribuion can you choose which applies.
Inheritances Per Capita
The term “per capita” is Latin for “by heads” or “for each had.” To understand how such inheritances work, it’s best to use an example.
Let’s say you have four children. Each of your children also has a child of their own. Further, let’s say you create a will that states that each child will receive an equal portion of your estate per capita.
Once you die, your estate will be divided between your four children. However, should one or more of your children die before you, the remaining children will distribute your estate between themselves. So, if two of your children die before you, the remaining two children will each receive half of your estate. In a per capita inheritance plan, the offspring of your inheritors do not stand to inherit.
Inheritances Per Stirpes
A per stirpes inheritance is distributed diffeerently than a per capita inheritance. In a per stirpes situation, the descendants of those who would have inherited had they been alive at the time of your death also inherit.
For example, in the situation outlined above, you die leaving behind a will that states each of your four children will receive an equal portion of your estate. However, because two children died before you, that means only to of your children remain.
In a per stirpes inheritance situation, each of the surviving children would receive one quarter of your state. The descendants of the two deceased children inherit the shares their parents would have received had they been alive. In this situation, that means that the individual grandchildren from each of your deceased children will receive one quarter of your estate.
The best way to determine how to provide for both your primary or contingent beneficiaries is to consult with an experienced and qualified estate planning attorney.