After a long and happy life, Grandpa Watkins moves on to the great beyond.
He leaves a Last Will and Testament, duly signed and witnessed, in which he expresses his desire to have his assets divided equally among his two sons and two daughters. Unfortunately, several years prior to Grandpa Watkins’ death, his eldest daughter, Lilabeth, was killed in a tragic fall from a horse. Grandpa Watkins never updated his will.
Lilabeth left behind a grieving husband, Fred, and six children. Will they inherit Lilabeth’s share of Grandpa Watkins’ estate?
It all depends.
Under California law, the language used in a will can make a significant difference in how assets are distributed upon death. Failing to name alternate or contingent beneficiaries on all estate planning and financial documents could effectively cut off the children of deceased heirs.
If Grandpa Watkins had died without a will (intestate), under state law, Lilabeth’s children would have inherited her share of his estate. To ensure that result in a will, however, special language is required. Two phrases are used in estate planning: Per stirpes and per capita.
While both terms are used when expressing the intent to distribute assets to a group of people, they have very different meanings and results.
Per stirpes is the Latin word for “by the roots.” It refers to each branch that sprouts from the root of the family tree (the testator or estate holder). It is used to indicate that every branch of the family tree is to receive an equal share of an estate. Typically, children and possibly grandchildren are considered the branches. In effect, inheritance rights flow through the branches.
For example, if Grandpa Watkins’ will states: “I leave all of my personal and real property to my children, Alexander, Margery, Thomas, and Lilabeth, to be divided into equal shares per stirpes,” his estate will be divided into four equal shares. One each will go to Alexander, Margery, and Thomas, and the fourth share will be divided among Lilabeth’s six children. However, if Lilabeth dies without children, Grandpa Watkins’ estate would be divided only among the three surviving children. Note that Fred, Lilabeth’s husband, would not receive her share.
The use of per stirpes in more general terms, however, could have a different result. If Grandpa Watkins’ will does not list his children by name, and merely states, “I bequeath my personal and real property to my issue in equal shares per stirpes,” that could be interpreted to mean shares of his estate should be allocated to all of his descendants, including children and grandchildren.
Per capita is the Latin phrase for “by the head.” For estate planning purposes, when an estate is distributed per capita, all of the surviving members of a group receive an equal share of the decedent’s estate. If a member of the group predeceases the estate holder, that share passes to the other members of the group, rather than their descendants.
If Grandpa Watkins’ will states: “I leave all of my real and personal property in equal shares per capita to any descendants who survive me,” his estate would be divided equally among all of his living heirs. A “descendant” is someone who has been born after a specific blood relative, such as a grandparent or parent. Under this provision, anyone who has descended directly from Grandpa Watkins would be entitled to a share of his estate.
In addition to his three surviving children and Lilabeth’s six children, any additional grandchildren or great-grandchildren born before Grandpa Watkins’ death would receive an equal share of his estate. If his son, Alexander, has three children, and Margery has five, Grandpa Watkins’ property would be divided into 17 equal shares. Age or circumstance do not matter, each of his blood heirs will receive an equal share. (Note that poor Fred still receives nothing.)
If Grandpa Watkins failed to provide for inheritance per stirpes or per capita, only the surviving named beneficiaries: Alexander, Margery, and Thomas, would receive a share of his estate.
Similarly, if Grandpa Watkins listed his four children as beneficiaries on a $1 million life insurance policy, only the surviving beneficiaries would receive a portion of the proceeds. Failure to list contingent or alternative beneficiaries, or to include the phrase per stirpes or per capita after the names of each beneficiary, would preclude any benefit to heirs of a deceased beneficiary.
It is not essential that the terms per stirpes or per capita be used to provide for the descendants of deceased heirs, but the intent of the maker of the will must be clear. It is acceptable, for example, to list the names or category of contingent beneficiaries in a will: “If any of my children fail to survive me, I leave their share of my estate to their children, in equal shares,” would have the same impact.
It is also important to include the names of contingent beneficiaries on any documents that require the names of beneficiaries, whether the primary beneficiary is intended to be a spouse or someone else.
The death of any potential beneficiary or descendant should trigger a review of all documents that will provide some sort of inheritance. Trusts, life insurance policies, retirement plans, and other vehicles for producing income, should all be examined and updated to ensure that all intended beneficiaries are clearly identified.
There is only one instance when children of deceased heirs are automatically entitled to receive an inheritance, and that is when an estate holder dies without a will.
Words matter in testamentary documents, including a will or trust. The role of an estate planning attorney is to ensure that every word used in your estate plan furthers your intent. Your objectives regarding heirs and beneficiaries must not only be clearly stated, but also clearly defined.
