How Does Estate Planning Distributions Work?

By: Sarah Meinhart, estate planning attorney

The essence of estate planning is to direct distribution of one’s estate to his or her intended beneficiaries through “dispositive” language, including the distribution of property, whether it be personal property, investments, or liquid assets. Many planning tools are distribution schemes and being familiar with each type gives you more precision in deciding who ultimately inherits your estate.

Instead of needing to name specific beneficiaries, distribution scheme language allows for a class of beneficiaries to inherit from your estate. 

In all distribution schemes, a deceased child who doesn’t have surviving heirs isn’t designated a share. Spouses of a deceased beneficiary don’t inherit unless the Trust or Will provides for them to inherit. 

Per Stirpes 

Per stirpes is a Latin phrase that translates to “by roots” or “by branch.” Each member of a specific class receives equally, with the share of a deceased member divided proportionality among his or her children. 

Under the Estate and Protected Individuals code, there’s an allocation at each generation even if there’s no living member of that generation, as opposed to a distribution beginning at the first generation with a living member. 

Here’s an example:

If a Decedent has three children, Child 1 has two children, and Child 3 has three children. Child 1 and Child 3 predecease the Decedent, and the Trust or Will requires a per stirpes distribution.  The estate will be divided into 3 equal shares. The children of Child 1 would each get half of Child 1’s share, ultimately being a one-sixth share of the Decedent’s total estate. The children of Child 3 would each receive  one third of Child 3’s share, being a one-ninth share of the Decedent’s estate, and Child 2 – who is still living, but has no children – would receive one third of the total estate.  

Simple Per Capita, Per Capita, and Per Capita at each Generation, also known as “By Representation”

Per capita is a Latin phrase that translates to “by head.”  This equalizes the shares per designated class.  

In this method of distribution, each child receives a share, and the remaining shares are divided equally among the surviving descendants of the deceased child(ren), within each generation.  

Using the previous example, Child 2 would receive a one third share of the estate, then the remaining third share of Child 1 and Child 3, or two thirds of the  total estate, would be divided equally between the grandchildren, giving each grandchild an equal 2/15 share of the estate.  

Takeaway

Discuss how the different distribution methods can affect distribution of your estate with your estate planning attorney in Ann Arbor.  

Please see below chart for further analysis.