Per stirpes is a legal term that describes how your assets are divided and distributed. In Latin, per stirpes simply means “by branch.” If you choose to distribute assets to your children first, but then to their children should they pass away before you do, you have in essence set up your Will or Trust per stirpes.
Read on for everything you need to know about how per stirpes works in Estate Planning. We’ll cover:
Per Stirpes Meaning
Per stirpes is defined as a designation that dictates where and how your assets should be passed down in the event a Beneficiary passes away before you do. The easiest way to think of a per stirpes designation is this: if a Beneficiary dies before you do, their share of your estate will automatically and evenly go to their child or children.
So, if your estate is set up to be distributed “per stirpes” and a Beneficiary dies, each named, living Beneficiary would receive their original portion of your estate. Any heirs of the deceased Beneficiary would split that portion of the inheritance equally.
Common uses in Estate Planning
According to the per stirpes definition, this can be a great strategy to use if you want to be sure you’ve set up an Estate Plan that will remain valid and fair even if a Beneficiary passes away before you do.
It’s an effective tactic in that it eliminates the need to create new documents or update plans each and every time a Beneficiary passes away while you’re still living. Since per stirpes distributions will automatically pass through equally amongst a Beneficiary’s heirs, there’s no need to update any of your documents.
Lineal Per Stirpes
Lineal descendants per stirpes, or LDPS, is a legal term that’s commonly used in the world of Estate Planning. It’s an important concept because in the absence of a Trust, it may allow an inheritance to pass from a deceased Beneficiary through to his or her own heirs without the hassle, time, stress and expense of probate.
When would lineal descendants per stirpes not be a good solution? There are two basic and common instances when per stirpes might not be the route you want to take. If you would rather:
reallocate a deceased Beneficiary’s inheritance to be redistributed among remaining living Beneficiaries
or
include an entirely new Beneficiary upon a Beneficiary’s passing
...per stirpes may not be for you.
Keep in mind, if either of the above are the case, you would need to update your Estate Plans accordingly should a Beneficiary pass away before you do.
In a way, lineal per stirpes is a no muss, no fuss way to set up the pass through of a Beneficiary’s inheritance on to their own children. With per stirpes, there’s no need to specifically name each person beyond the initial Beneficiary.
Per Stirpes Beneficiaries
Per stirpes is a way to protect your Beneficiary and his or her heirs. It means you don’t have to worry about where an inheritance will go, because the per stirpes designation is clear.
Another benefit of per stirpes is it can eliminate any questions from other Beneficiaries about what should happen to an original Beneficiary’s share. Others won’t assume they can split the now-deceased’s portion between themselves.
Example of Per Stirpes
An example may help give per stirpes some meaning. Let's say you have three children. Distributing assets to your children would mean each child receives ⅓ equally. That's pretty simple.
But what if one of those children passes away before you do? If he or she has two children (your grandchildren), distributing per stirpes would mean your two living children still receive ⅓ each, but the remaining ⅓ that was intended for your deceased child would now be split between his or her two children, so they would end up with ⅙ each. Each branch still receives ⅓, but one of those branches is split between the two grandchildren.
Just saying per stirpes is a lot easier than spelling out what happens in every possible circumstance. It's one of those rare times when speaking like a lawyer means fewer words!
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