Per Stirpes. No, this is not an article about a venereal disease.
When a person dies, the assets of that person must be distributed to the decedent’s heirs (without a will), devisees (by a will), or beneficiaries (by a trust document). The determination as to who receives what can be quite simple if the governing document sets forth their names. For example, “I give to my daughters Jane Smith and Betty Smith in equal shares.” There is no confusion here. Each gets 50%.
The confusion begins when a beneficiary (the term “beneficiary” is used here to designate an heir, devisee, or beneficiary) dies when named in the governing document. For example, John Smith, the settlor (the person who wrote the will) names his two daughters, Jane Smith and Betty Smith to receive his assets. But before John Smith died, his two children pre-deceased him (Jane and Betty died before John Smith). Jane had two children and Betty three. Does each of the 5 grandchildren share equally? Or, do Jane’s two children share her 50% and Betty’s three children share one-third of 50%?
The answer to that question goes to the understanding of two probate concepts. The first is per capita. This concept provides that unless specified otherwise in the Will or Trust, each of the five grandchildren would receive an equal share.
The second concept is called per stirpes and is sometimes referred to as right of representation. This concept provides that unless specified otherwise in the Will or Trust, each grandchild receives the share that their deceased parent would have received if they had been alive. So, in the example above Jane’s two children would share her 50% and Betty’s three children would share her 50%.
The impact should now be clear. With a per capita distribution, each grandchild receives 20% of the estate. With a per stirpes distribution, Betty’s three children each receive 16.7% and Janes’ two children would each receive 25%.
Michigan law provides for how to determine which method is to be used for distribution. Generally, the testamentary document controls (Will or Trust) and whatever is set forth within that document will be used for distribution. If there is no testamentary document, Michigan’s intestate law now provides for a distribution per capita.
It is critical to do appropriate estate planning to ensure that your intent is met. Only a qualified attorney can provide assistance to properly draft estate planning documents.
The Probate Pro can assist. Give us a ring.