What Is Per Stirpes In Wills? How It Works

When it comes to an estate or financial plan, there are a lot of decisions you will have to make. One of the most important decisions involves knowing to whom, and how, you want assets to be distributed when you die. This is where Per Stirpes in Wills comes in.

With per stirpes, you don’t need to worry about how to share your asset or who you want your asset to be given when you are no more.

All you need to do is to fill in the necessary information in the document when you are alive and they help you distribute it as you have instructed.

But before we continue, let me tell you a little about Per stirpes in wills

Per stirpes in wills is a legal term that describes how your assets are divided and distributed, but it all depends on how you set your will.

So read on for everything you need to know about Per stirpes and how it works, also a difference between per stirpes and per capita.

But before we continue, you can go through the table of content below for an overview of what to expect in this article.

What Is Per Stirpes In Wills?

Per Stirpes is a legal word from Latin, which is also known as “by root” or “by branch”. It refers to your beneficiaries. They take from your estate by right of representation, which means that they’ll inherit in a share equal to that of the individual they’re representing.

While the term per stirpes is commonly used to refer to an individual’s assets under a will, it is sometimes used in beneficiary designations for individual retirement accounts (IRAs).

If you die without a will, your estate goes to your heirs according to the laws of the state in which you live.

How Does Per Stirpes In Will work?

The testator (a parent) specifies in his will that his estate is to be divided among his descendants in equal shares per stirpes.

According to the data from the balance, if you as one of the children or descendants have two children, each of them might receive a one-half share of your estate.

Your grandchildren will receive nothing, at least while their parents are living. But if one of your children should predecease you, her one-half share would pass in its entirety to her children. 

While, if she is the parent of three of your grandchildren, each of those grandchildren would receive 1/3 of her 1/2 share of your estate, or 1/6.

Your other child would still receive his one-half share and your deceased child’s one-half share would be divided equally among her three children.

One-half divided by three equals 1/6 of your overall estate, so that’s what each of these three grandchildren would receive.

Note: Spouses are not considered in per stirpes distribution.

Benefits Of Per Stirpes In Wills Beneficiaries

Per Stirpes In Wills Vs. Per Capita

Actually, Per stirpes mean that assets are divided equally by each branch of the family when there were surviving descendants in that branch

This is sometimes called “by right of representation” because the descendants of a deceased heir will inherit that heir’s share.

While Per capita means “by the heads.” Also called “share and share alike,” in this section, the property is divided equally among surviving descendants in the same generation nearest the testator (parent).

The estate holder names each recipient individually or determines which group receives the assets, such as all estate holder’s children, grandchildren, or both.

A deceased person’s share is not set aside but is mingled with the estate and divided among the other recipients.

There is no “right” or “wrong” distribution plan. For some people, per stirpes, best reflects their wishes. In other cases, people choose per capita distribution.

It’s important to understand the difference so you can make sure your trust and will reference the strategy that best aligns with your goals and wishes.

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Also read: Are online wills legal? 10 Best online will-maker in 2022

Steps On How To Select Per Stirpes or Per Capita On Your Retirement Account

Here are steps you should follow if you want to choose per stirpes or per capita on your retirement account.

Step 1: Contact the bank or custodian where your retirement accounts are held, for example, Fidelity, Vanguard, Morgan Stanley, etc., and ask for a copy of your current beneficiary designations.

After that, you review your current designation and do the thing mentioned below:

1. Confirm if what you currently have on file is correct and aligned with your intentions.
2. Check to see if per stirpes has been selected. (Remember, per capita is typically chosen by default.)

If everything is correct, your job is done. If things are in need of updating, then move to step 2.

Step 2: If you need to make a change to your beneficiaries – including per stirpes or per capita – you need to contact your bank or custodian and request this form. Every bank or custodian has a “beneficiary designation form.”

Also, you can contact your financial planner if you have one. With the beneficiary designation form in hand, you can make the appropriate changes to your beneficiary designations.

CONCLUSION

If you want to use per stirpes to set up the beneficiary designations on your retirement accounts, you will be faced with the question of, should you use per stirpes.

But it all depends on several factors to consider like: Do you want your money to pass to your beneficiary’s heirs?

Also,  if you’re looking at passing assets to your children (and your grandchildren via per stirpes), consider the grandchildren’s ages.

All these questions are not easy to answer, which is why you may want to consult with a financial planner and estate attorney to help choose your beneficiary designations.

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