Deciding which family members will receive your assets upon death is one of the main considerations in estate planning. It is awkward to consider what would happen to an inheritance should one or more of your family members predecease you, or if one of your siblings predecease your parents. For example, if your mother leaves her estate to her three children equally (your siblings), and one of them dies before her:
- What happens to that adult child’s share named in the estate plan who predeceased their mother?
- Is the predeceased child’s share divided between the surviving siblings?
- Or, if the deceased sibling was an adult with a child of her own (the testator’s grandchild), is that part of the deceased mother’s estate given to her grandchildren, or divided between the surviving siblings?
These estate planning decisions are made based on the type of survivorship option specified in the estate plan whether in a Will, Trust, or sometimes even mentioned in combination plans that include both a Will and a Trust.
The three main types of survivorship methods used by estate planners are:
- “Per Stirpes;”
- “By Representation;”
- “Per Capita.”
The easiest way to explain these different concepts, and why they could matter, is to use a real-life example from a well-known family: the Kardashians.
Below we outline what would happen under each survivorship option if Kris Jenner left her entire estate to her six biological children: Kourtney Kardashian, Kim Kardashian, Khloe Kardashian, Rob Kardashian, Kendall Jenner, and Kylie Jenner — however, for this example, imagine that an unfortunate random freak accident occurred, causing Kourtney and Khloe, both who have children of their own, to pass away before their mother, Kris.
By Representation
For an estate that is distributed to beneficiaries using the By Representation survivorship option, if an adult child (or multiple children) named in a Will or a Trust, has already passed away (“a predeceased beneficiary”), their shares are divided equally between all their children even if one or more die first. In this way each child is “represented” in the estate even if they pass away because the inheritance is distributed to the next generation equally – usually to the testator’s grandchildren (I.e. a deceased adult child’s children).
So, in this example, there are a few “ifs” that we need to assume. If Kris’ Will or Trust left her estate to her children By Representation, and if Kourtney and Khloe (both moms themselves) predeceased Kris (a Grandmother), Kris’ estate would be distributed as follows:
- 1/6 to each of Kris’ surviving four children: Kim, Rob, Kendall, and Kylie for a total of 4/6 of Kris’ estate; and then …
- 2/6 would be equally divided among Kris’ grandchildren if their moms had passed away: Kourtney’s three (3) children: Mason, Penelope, and Reign; along with Khloe’s one (1) child, True.
Per Stirpes
Now if Kris chose a Per Stirpes survivorship option in her Will or Trust, the closest familial relationship controls, and that beneficiary will receive an equal share of the deceased’s family member’s assets. So, using the same example as above, where adult children and moms, Khloe and Kourtney predecease their mother Kris, Kris’ estate would be distributed as follows:
- 1/6 to each of Kris’ surviving four children: Kim, Rob, Kendall, and Kylie for a total of 4/6 of Kris’ estate; and then …
- Kourtney’s three (3) children (Mason, Penelope, and Reign) would each divide Kourtney’s 1/6 share of their grandmother Kris’ estate three ways; and then
- Khloe’s only child, True, would receive Khloe’s entire 1/6 share.
Therefore, comparing the two survivorship options above, per stirpes and by representation, whether the terms are present in a Will or a Trust, you can see that the difference is essentially whether the grandchildren would receive equal shares. In the first example, by representation, the grandchildren inherit the predeceased mom’s shares equally.
By contrast with the per stirpes method, the grandchildren inherit the shares of their predeceased mother, but those shares are split between siblings. However, there is one more choice you can make for your estate planning survivorship option in your Will or Trust:
Per Capita
“Per Capita” is a Latin term literally meaning “by heads,” or “for each head”, and synonymously meaning “per person.” In estate planning, the per capita survivorship option in a Will or a Trust is when an inheritance is divided based on the number of immediate family members who are living at the time of the person’s death (i.e., shared among the number of survivors, or by each head). Applying this per capita rule to the same hypothetical above, where Kourtney and Khloe die before Kris, Kris’ estate would be distributed as follows:
- 1/4 to each of Kris’s surviving children: Kim, Rob, Kendall, and Kylie; and then
- Zero to Kris’ surviving grandchildren if Kourtney and Khloe pass away before Kris.
In other words, Kourtney’s children (Mason, Penelope, and Reign), and Khloe’s child (True) would not be entitled to any of their respective parents’ shares under the per capita survivorship option if their mothers predeceased their grandmother.
As you can see, these three (3) methods of survivorship commonly used in Wills and Trusts, can make a major difference determining who may inherit and how much of an inheritance they receive. Special consideration should be given to these various scenarios, especially when grandchildren are involved to make sure your legacy is distributed how you would expect.
You may want to review your Will or Trust to better understand which survivorship option you selected for your legacy, and contact us if it is not what you expected. Or, if you are unsure, we would be happy to review your Will or Trust for you to let you know how things stand now, and what survivorship option you selected. If you are expecting a potential inheritance, from your parents or grandparents, best practices would be to plan for a way to receive that inheritance now, to minimize costs, taxes, and future legal fees before you receive the expected inheritance.
In addition, rather than choosing one of these survivorship options to distribute your legacy, you have the choice to customize your Will or Trust to name specific family members and/or friends, a charity, or create a generational legacy that could extend into perpetuity.
Other Estate Planning Considerations
The Kardashian-Jenner family tree also involves many other important estate planning topics that are important to consider when reviewing existing legal documents such as guardianship and power of attorney, in addition to traditional last Will and Testaments, or the more flexible Revocable Living Trusts recommended with thorough estate planning options.
For example, Kourtney and Scott Disick have had a long time on again, off again relationship and have three (3) children together, but never married. How does this potentially affect planning?
It is now common for couples to remain unmarried and have children. In such situations, it is especially important to ensure guardianship provisions are up to date in estate plans, and to consider specifically naming beneficiaries who would not traditionally be included in blood relative survivorship options which are strictly controlled by biological inheritance rights, or bestowed through marriage.
While it is not necessary to marry to have an estate plan, if you are unmarried, and/or are a step-parent, or a co-parent, they may not have all the rights you would hope and expect if anything unfortunate occurred whether you become incapacitated, or pass away. There are also important estate tax planning strategies to consider regarding inheritance and marriage.
Estate Planning for Transgender Individuals & Gender Neutrality
In addition, the Kardashian-Jenner family also raises the issue of estate planning for transgender individuals, and gender neutrality.
As in the case of Caitlyn Jenner, previously Bruce Jenner, if Bruce Jenner was named in any prior estate plans before her transition, as part of the probate process, a Court will need to consider evidence to confirm that Caitlyn was previously Bruce Jenner. In addition, if you have named a person who is transgender as a fiduciary for your estate, evidence would also be needed prior to their assuming control of your financial affairs to prove their identity, or to make decisions under your health care power of attorney.
To avoid any potential transgender inheritance issues, and unnecessary legal fees, best practices call for updating your existing estate plan to ensure that proper names and pronouns (he/she language) are replaced with inclusive language are used to avoid confusion and improper interpretation of plans. You would not want your current or future grandchildren to be restricted from receiving a gift, or have your estate subjected to a court hearing just to prove he was a she or vice versa. By updating your estate plan, and confirming beneficiary designations in your life insurance policies, you can avoid stress and also ensure your legacy and desires will be met the way you intended without legal intervention, needing to hire a probate attorney, or endure the probate process.
What We Can Learn From The Kardashian Family
The Kardashian-Jenner family tree shows that estate planning can sometimes be complicated, but it is important to make sure your plans are set up properly to ensure that your estate is distributed the way you intended it to be. The most crucial step is to make sure you have a plan in the first place. If an individual dies without a Will or Trust in place, state law decides how the person’s estate is distributed, regardless of what the individual actually wanted. In addition, the distribution of an inheritance is typically dictated by blood relatives and marital status unless wishes are memorialized through estate planning.
Next, it is critical to regularly review and update plans, as necessary, to make sure they continue to achieve your wishes, stay current by being gender neutral, and also take advantage of all the estate planning legal tools so your money goes to your friends, family, and/or charity of your choice – rather than with a huge tax bill to the government. Other estate planning best practices include regularly reviewing your retirement accounts, speaking to the financial advisor who manages your retirement plan/brokerage accounts, considering how you hold your bank accounts and real estate (i.e., jointly, individually, or in the name of your business), and confirming that your beneficiary designations are current.
With an understanding of the different survivorship options discussed here, you may realize that your current plan does not do exactly what you thought it did or what you would like it to do. Also, the survivorship options may not appeal to you — you can also select a customized survivorship option with conditions to inherit that are personal to you naming specific family members, loved ones, and/or charities. Wills and Trusts are not one size fits all. Also, it may be important to you to make your own choices about the medical care you receive in case of an emergency. In that situation, your estate plan should include an advance healthcare directive, or a living will, as well as a health care power of attorney.
Learn more about Celebrity Estate Planning Mistakes to Avoid
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An experienced estate planning attorney can help you prepare and guide you through the process of protecting your wealth and possessions and also provide strategies to leverage your legacy. Estate planning attorneys at General Counsel, P.C. can guarantee that you will feel more confident about your future after you make your estate plan or update your existing plan.
We would welcome the opportunity to help you navigate the estate planning process, as well as discuss inheritance tax planning considerations, and ways to avoid being held up in probate court if you expect to receive an inheritance.
Contact Ann-Marie Murzin today at intake@gcpc.com, (571) 396-8460, or schedule an appointment here, to learn more about how we can help you protect yourself, and your loved ones!