9-Sep-21
Per Stirpes – It’s Not as Simple as You Thought
Take-Away: Wills and Trusts often refer to per stirpes to describe a class gift to descendants. As a surprise to many, the concept of per stirpes is not the same under the governing laws of each state, which can lead to much confusion when the Will or Trust is construed with regard to the members of the class or used to identify what their interest in the estate will be.
Background: Per stirpes is a Latin term that means by the roots. Use of the term per stirpes permits the shares under a Will or Trust to be divided fairly among multiple generations of descendants when some descendants may have predeceased the decedent. While some descendants may die before the estate planning instrument becomes effective, thus ‘leaving’ the class, other descendants may be born after the instrument becomes effective, thus ‘expanding’ the class. Accordingly, when a Will or Trust’s dispositive provision refers to per stirpes, it provides the advantage of covering a wide range of outcomes without the need to amend or redraft the instrument each time a descendant is born or dies.
Per Stirpes: Per stirpes is thus a descriptor about how to allocate a gift/bequest among a class of beneficiaries- descendants. The intention behind using the term per stirpes in a Will or Trust is to account for the birth or death of a beneficiary without having to revise each estate planning document. Yet use of the term per stirpes can also create an ambiguity.
Example: Assume a brother leaves his estate under his Will “to my brother and sister, per stirpes.” Assume the named-beneficiary brother has predeceased, who left two surviving children. Should the deceased-beneficiary brother’s share be divided between his two surviving children, or should the decedent’s entire estate be allocated to his sister who is the sole member of the identified class in the decedent’s Will, ‘ to my brother and sister’?
Example: A Will provision that leaves the decedent’s residuary estate “to my children in equal shares, per stirpes” creates an inherent ambiguity. “Equal shares” and “per stirpes” are two different methods to allocate a gift or bequest among a class of descendants.
Or, sometimes a Will or Trust completely misuses the term per stirpes.
Example: A Will’s residuary clause leaves the balance of the decedent’s estate “to John Doe, per stirpes. This is an incorrect use of the term per stirpes. John Doe is a specific person and not a class of individuals. A better way for the Will to express the testator’s intent would be: “to John Doe, or if he is not living, then per stirpes to his descendants.”
In other words, the term per stirpes should only be used to refer to a class of descendants or issue, not to an individual.
Two Classes of Per Stirpes: Coming as a surprise to some, there are two types or categories of per stirpes. One type is called strict per stirpes and the other is called modified per stirpes. [Or, as some legal treatises describe them, the strict per stirpes is called English per stirpes and the other is called American per stirpes, but even these labels are misleading.]
Strict per stirpes: To determine the proper number of shares using strict per stirpes, the estate is divided into shares at the generation nearest the decedent.
If a Will or Trust states “to my descendants per stirpes, the estate would be divided into primary shares at the children generation. The number of the primary shares would be equal to the number of children then alive at the decedent’s death, plus the the number of children who predeceased the decedent if that predeceased child has descendants who survive the decedent. If a child predeceased the decedent and did not have an descendants of his or her own, that predeceased child would be disregarded in the determination of the number of shares to be created. [Restatement (Third) of Property (Wills and Donative Transfers, Section 2.3(d).]
Modified per stirpes: Modified per stirpes follows the same rules, except the primary shares are distributed at the generation nearest to the decedent that has any living descendants. Accordingly, in the situation where a decedent has predeceased children who have then-living descendants, the primary shares will be split at the level of the decedent’s grandchildren, since that is the generation nearest to the decedent that has living decendants. [Restatement (Third) of Property (Wills and Donative Transfers, Section 3(e).]
In effect, this different starting point effectively redistributes the decedent’s estate per capita (or ‘by the head’) among the first living generation rather than dividing one generation above. This can create a different result than would be the case with a strict per stirpes distribution. Because modern per stirpes at the generation nearest to the decedent that has any living descendants, it is sometimes also called per capita with representation. [Restatement (Third) of Property (Wills and Donative Transfers) Section 2.3(e).]
Example: Dad has three sons: Abe, Ben, and Cal. Abe has one child, #1. Ben has two children, #2 and #3. Cal has three children, #4, #5 and #6. All of Dad’s sons die before Dad. Dad’s Will leaves his estate “to my descendants, per stirpes.”
Under the strict per stirpes interpretation, #1 grandchild will receive one-third of Dad’s estate. #2 and #3 grandchildren will split one-third of Dad’s estate, or each will receive one-sixth of Dad’s estate. #4, #5 and #6 grandchildren will all split the remaining one-third share of Dad’s estate, so that each of them (#4, #5, and #6) will each receive one-ninth of Dad’s estate.
Under the modern per stirpes interpretation, each of the six grandchildren of Dad, i.e. #1 through #6, each receives one-sixth of Dad’s estate, as there was no one child living in the generation above them, i.e. all of Abe, Ben and Cal did not survive Dad.
This is how it is possible the simplet use of the term per stirpes can dramatically affect how much a descendant of the deceased will ultimately inherit.
State Variations: Making life even more interesting is the fact that the states do not all follow the same interpretation of per stirpes.
Strict per stirpes: States that actually use the term per stirpes in their statutes and which follow the strict per stirpes interpretation include: Delaware, Florida, Georgia, Illinois, Iowa, Kentucky and Tennessee. States that follow the strict per stirpes interpretation, but do so by case law and not statute include: Connecticut, Kansas, Maryland, Mississippi, Oklahoma, Rhode Island, South Dakota, and Wyoming.
Modern per stirpes: States that follow the modern per stirpes approach are: Arkansas, Indiana, Ohio, Massachusetts,Missouri, Nevada, Pennsylvania, Texas, Vermont, Washington, and Wisconsin.
Revised Uniform Probate Code: Michigan, along with a few other states, e.g. Arizona, Colorado, Hawaii, New York, and North Carolina has adopted Section 2-106 of the Uniform Probate Code. [Restatement (Third) of Property (Wills and Donative Transfers, Section 2.3, Note 4, comment g.] UPC 2-106 [MCL 700.2106(1)] of the Revised Uniform Probate Code will divide an estate:
‘Into as many equal shares as there are (i) surviving descendants in the generation nearest to the decedent which contains one or more surviving descendants and (ii) deceased descendants in the same generation who left surviving descendants, if any. Each surviving descendant in the nearest generation is allocated one share. The remaining shares, if any, are combined and divided in the same manner among the surviving descendants of the deceased descendants as if the surviving descendants who were allocated a share and their surviving descendants had predeceased the decedent.” [Head spinning yet?]
The Reporter’s Commentary to this provision in EPIC notes: “Section 106 articulates a distribution per capita at each generation…..There are two reasons why EPIC included this “per capita at each generation” system. The first is to provide equal shares to those equally related to the decedent whenever possible, resulting in perceived equal treatment. The second reason is that several empirical studies and a 1988 survey of client preferences by ACTEC indicated that most clients prefer the “per capita at each generation system of representation.”
Conclusion: The next time you see a Will or Trust that uses the term per stirpes, you may want to think twice and ask yourself if the use of that term actually reflects the testator or settlor’s intent. In Michigan, it means per capita at each generation” which may come as a surprise to those who draft Wills and Trusts.