Distribution Schemes

A common issue that many people don’t consider when planning their estate is how their property will be divided if an individual to whom they leave property doesn’t outlive them. For example, Grandpa might leave property via his Will “to my children, in equal shares.” But what happens if some of Grandpa’s children died before he did, and he wants Grandchildren to step into the shoes of his deceased children to take the property instead?

This is an important topic to address in a Last Will and Testament. A well-written Will should use an appropriate legal term to describe how property will be divided if named distributees are not alive to take the property that has been left to them. The Will should also provide a clear definition of the legal term used.

What many estate planning clients often don’t realize is that they have a choice. While it can be a bit complicated to grasp, it’s important to note that you can select the method of distribution with which you are most comfortable, and which works best for your situation. The most common methods are:

Per Stirpes. This is the term probably most often see in Wills. It literally means “by the stocks” or “by the roots.” The context in which it is used will be, for instance,: “If X does not survive me, I leave my estate to the descendants of X, per stirpes.” There are two different schools of thought on per stirpes:

Strict Per Stirpes. Let’s assume Grandpa had two children, A and B. A only had one child, Grandkid#1. But B had two children, Grandkid#2 and Grandkid#3. Under ‘strict per stirpes’, Grandpa’s estate will be divided right down the middle, into two “stocks.” One half will pass down to A, and the other half will pass to B. But what if A and B die before Grandpa does? In that case, A’s half would be inherited by his only child, Grandkid#1. B’s half would likewise be inherited by his children, but since he had two children, Grandkid#2 and Grandkid#3 will have to split B’s half, giving them ¼ each. End result: Grandkid #1 ends up with ½ of Grandpa’s estate, Grandkid#2 with ¼, and Grandkid #3 with ¼.

Modern Per Stirpes. If ‘modern per stirpes’ is used, the “takers” aren’t determined until the first generation in which someone is alive. In the above example, for instance, if A and B are both dead, then their generation is irrelevant. The third generation, the grandchild level, is the one in which there are living people. So Grandpa’s estate will instead be split into three shares, with each grandchild taking an equal share. End result: Grandkid #1 ends up with 1/3 of Grandpa’s estate; Grandkid #2 with 1/3, and Grandkid #3 with 1/3.

Per Capita at Each Generation. Again, the context in which you’ll see this term will be, for example, “If X does not survive me, I leave my estate to the descendants of X, per capita at each generation.” To best illustrate this method, let’s assume Grandpa had a third child, C. So now we have A, B and C. A and B are dead. But let’s say C is alive. With ‘per capita at each generation,’ the estate will be divided into shares, with each alive person at the highest generational level (A, B and C’s level) getting one share. If there are deceased people at that generational level, their shares are combined into one pot, and divided equally among the next generation. So since A and B are dead, their two shares are combined, and divided equally among their children. End result: Carl ends up with 1/3 of Grandpa’s estate; and Grandkid#1, #2 and #3 split the remaining 2/3rds of the estate (i.e., get 2/9 each).

Which distribution scheme will be best for your situation will greatly depend on both your family situation and your personal wishes. Although the schemes may be difficult to comprehend, they are easily diagramed and explained by the experienced Wills and Trusts attorneys at Garg & Associates. Visit us today; we are here to help you with all of your estate planning needs, and will take the time to explain your options to you in an easy-to-understand way.

We invite you to contact us for a consultation. Call Garg & Associates, PC at 281-362-2865 or complete our contact form.

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Garg & Associates, PC | 21 Waterway Avenue, Suite 300 | The Woodlands, Texas 77380 Please call 281-362-2865 | Fax: 866-743-4506
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