Tuesday, December 07, 2010 NEET Tips
NEET Tips answers questions posed online to the NEET website.
What does “Right of Representation” in a will or trust mean?
Right of Representation is one of three common law survivorship options for passing assets to the descendants of your children that comes into play if a child predeceases you. For example, if you leave assets to three children, but one of your children dies before inheriting, your will or trust should have some default language detailing what percentage of the assets the deceased child’s children will receive.
For each of the following situations, assume there are three children, Peter, Paul and Mary who each inherit one-third of your assets. Peter has one child (Andrew), Paul has two children (Bob and Chris), and Mary has three children (Denise, Eunice and Francine).
Per Stirpes. The most common survivorship method is known as “per stirpes,” which means shares are determined by the number of children at the first level. Under this approach, if Peter and Paul predeceased, but Mary was still living, allocation among children and grandchildren would be as follows: Mary receives her one-third; Andrew receives one-third; and Bob and Chris each receive one-sixth. If all three children had predeceased, Mary’s one-third would be evenly split among her three children, so that each received one-ninth. In short, this approach means that each child receives their one-third share, and if the child predeceases, their share is evenly divided among their children.
By Representation. An alternative approach is known as “by representation,” which means shares are determined by the number of descendants at the first level that has living descendents. This is the same as per stirpes if one or more children are alive, but different if only grandchildren survive. If no children survive, the estate is divided equally among living grandchildren. Thus, Mary’s children do not receive a lesser amount because Mary had more children than Peter or Paul; instead Mary’s children, as well as Peter and Paul’s, each receive an equal one-sixth of the total estate.
Per Capital at Each Generation. An infrequently used alternative is known as “per capita at each generation,” which means shares are determined by the number of descendents at each level. Under this approach, each living child receives their one-third, and at the next generation, all grandchildren inherit equal shares, regardless of whether they have several sibling or no siblings. For example, suppose Peter and Mary predecease. Paul receives his one-third, and the children of Peter and Mary inherit equally, in this case each receives one-quarter of two-thirds, or one-sixth. |