What's the Difference Between Per Stirpes and Per Capita?

Setting up an estate distribution plan can get tricky. Whether you’re drafting your plan for the first time or updating it, understanding the difference between per stirpes and per capita is crucial to ensuring assets are distributed in accordance with your wishes. Confusing the two could result in assets being divided in ways that ignite family conflict after you’re gone.

Gain confidence in how you’ve set up your estate plan when you know the difference between these often-misunderstood terms.

What Does Per Stirpes Mean?

Per stirpes is a beneficiary designation that directs what should happen to an inheritance if a specific beneficiary passes away before you. With a per stirpes designation, the descendants of the deceased beneficiary will receive the assets.

For instance, if a grandmother with one adult grandchild elects a per stirpes designation and the grandchild passes away before she does, the inheritance will go to the grandchild’s descendants.

Benefits of Per Stirpes

Family dynamics and asset size should be considered as you weigh the benefits of a per stirpes designation. Individuals who elect this beneficiary option often benefit from:

• Convenience – If a beneficiary predeceases you, assets are automatically assigned to the next person in the family tree.
• Simplicity – It allows for the inheritance to flow from parent to children to grandchildren, and so on.

What Does Per Capita Mean?

Per capita is another type of beneficiary designation that directs what should happen to an inheritance if the beneficiary passes away first. Here, the inheritance does not flow to the deceased beneficiary’s family.

Let’s say a single parent divides their estate equally between their three children. If one child dies before the parent, the two surviving children will split the estate, rather than the deceased child’s portion going to their heirs.

Benefits of Per Capita

Using a per capita beneficiary designation might be a more attractive option as you plan your estate. Benefits include:

• Peace of mind – Gain peace of mind knowing assets are only given to individuals specifically named in your will.
• More control – Ensure specific family and non-family members receive the assets of your choosing after you pass away.

In the state of Illinois, per stripes is the default method when dividing an estate without a will. If the beneficiary of an estate passes before the estate’s owner, the estate would be divided among the remaining beneficiaries after the owner passes.

Understanding the different beneficiary types will help you make the best choice for your situation while ensuring that the people you wish to receive specific assets actually receive them.

We're Here to Help

Our experienced Town and Country Bank and Peoples Prosperity Bank Trust team is here to help protect your interests and those of your loved ones. One of our trust administrators can oversee assets held in a trust and provide guidance related to the distribution of your estate. Contact us at 217-787-3100 or email Trust@townandcountrybank.com today!