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The KRASA LAW, Inc. Estate Planning Blog

Friday, December 13, 2013

Calculating Your Survivorship Options

In my last article, entitled “What’s Your Contingency Plan?,” I mentioned the fact that many people do not give much thought to how they would like their estates to be distributed in the event that their beneficiaries pre-decease them.  Until they really start to unpack their estate planning options, it’s rare for most people to think about the possibility that their expectations of how things will play out might be thwarted by ephemeral nature of the world.  As I often say, people do not always die “in the right order.”  As difficult as it is to contemplate the possibility, it is important to have a thoughtful contingency plan in the event of such circumstances. 

Although the contingency plan options for people planning their estates are only limited by their imaginations, there exists a trio of common “survivorship” options in the event of a pre-deceased beneficiary.

(1)  Per Stirpes

Assume that Gwen has three children, Larry, Curly, and Moe. 

Upon her death, if all of them survived her, under a “per stirpes” model, they would each receive an equal 1/3 share of her estate. 

If Larry pre-deceased Gwen, the estate would still be divided into equal 1/3 shares.  However the 1/3 share that would have gone to Larry will go to Larry’s children equally.  If Larry had three children, those three children would take an equal 1/9 of Gwen’s estate.  If Curly and Moe survived Gwen, they would each receive their 1/3 share of the estate.  

If Curly also pre-deceased Gwen, his 1/3 would go to his children in equal shares.  If Larry only had one child, his entire 1/3 of the estate would go to his child.  If Moe survived Gwen, he would still get his 1/3 of the estate. 

If Moe also pre-deceased Gwen so that all three of Gwen’s children are pre-deceased, Gwen’s estate would still be divided into three equal shares – one share for each child that Gwen had.  Each child’s share would go to their children in equal shares.  Larry’s 1/3 would be divided equally between his three kids so they would each receive 1/9.  Curly’s 1/3 would go entirely to his only child and thus he would receive 1/3.  If Moe had two children, his 1/3 would go equally to his two children and thus each of them would receive 1/6.   

(2)  By Representation

Under a “by representation” model, the division would be the same as “per stirpes” above unless all three of Gwen’s children were pre-deceased.  In that case, the “by representation” model dictates that all of the grandchildren receive an equal share of Gwen’s estate, regardless of how many siblings they had.  Thus instead of Larry’s three children receiving 1/9 each, Curly’s only child receiving 1/3, and Moe’s two children each receiving 1/6, all six grandchildren would receive an equal 1/6 share. 

Unlike a “per stirpes” model where the division is based upon the number of children Gwen had regardless of whether any of them survived her, a “by representation” model bases the division on the first generation where there are living descendants.  This produces the result of not favoring those grandchildren who have fewer or no siblings.   

(3)  Per Capita at Each Generation     

A “per capita at each generation” model takes the logic of the “by representation” model one step further.  If all three of Gwen’s children survive her, the result is the same as it is for both “per stirpes” and “by representation above.”  If Gwen had one pre-deceased child, the results are again the same as both “per stirpes” and “by representation” above.  However, if Gwen had two pre-deceased children and one surviving child, the results are different.

Assume that both Larry and Curly pre-deceased Gwen but Moe survived her.  Moe will get his 1/3 of the estate.  However, Larry’s 1/3 of the estate and Curly’s 1/3 of the estate will be combined and will be divided equally among their four total children (three children of Larry and one child of Curly) and each of those children of a pre-deceased child will receive 1/6 of the entire estate.  “Per capita at each generation” treats all children of pre-deceased beneficiaries the same.   

Conclusion

If you find this confusing, consider the fact that I went to law school so I wouldn’t have to do math!  Regardless of your proficiency at determining fractions of fractions, understanding the basic concept behind these different survivorship options can help you determine how you would like your estate divided in the event of pre-deceased beneficiaries.  Although when planning your estate you are free to choose any of the three options above or any other option you develop through the power of your imagination, the default option under California law is “by representation.”

This article is for general information only.  Reading this article does not create an attorney/client relationship.  You should consult a qualified attorney licensed to practice law in your community before acting on any of the information presented in this article.

Furthermore, although calculating fractions of fractions makes Mr. Krasa feel like maybe he wasn’t so bad at math after all, he realizes this is as sophisticated as he gets when it comes to numbers and even then it is a stretch.  Mr. Krasa therefore makes no warranty whatsoever about the accuracy of the “math lesson” presented in this article and advises that you consult a qualified mathematician licensed to practice math in your community before relying upon the accuracy of any of the calculations presented in this article.   


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