You have a will or a trust in which you leave your property to your family or other beneficiaries when you are gone. As a backup plan, your will or trust should have contingent beneficiaries named in the instance that your initial/primary beneficiaries do not survive you.
You could list every contingent beneficiary individually, but that could be burdensome and make your will or trust really long. More often attorneys use the shorthand legal language, “issue”, “per stirpes” and/or “by right of representation.”
What is this legal mumbo jumbo and how does it effect the distribution of your property after you are gone? This legal shorthand basically describes who is going to get your stuff and how it is going to be divvyed up.
Firstly, the who. The who often times is a group of beneficiaries such as children, grandchildren or nieces and nephews. “Issue” is just a fancy legal word for your descendants (children, grandchildren, great-grandchildren, etc.).
Secondly, the how. There are an almost unlimited number of ways to divide your stuff among your living beneficiaries. Three of the most common that I see are: a) to the surviving members of a group of beneficiaries, b) per stirpes and c) by right of representation.
Surviving group members means just that. Only those members of the group of beneficiaries who survive you get a share. If they do not survive you, they get nothing and neither do their descendants. Per stirpes means that if a beneficiary dies before you do, their share goes to their descendants. Prior to April 2000 in Michigan, by representation or by right of representation meant the same thing as per stirpes. However, now it can have a much different meaning as a distribution per capita by generation. This is best explained by example.
Do you remember the math problem with the two trains going in opposite directions to New York and L.A.? It’s kind of like that, so here goes.
You are widowed.
You have four children.
Each of your four children has children, but not the same number of children.
Your estate is worth $1 million.
Case #1. You die before any of your children.
It will not matter whether you leave your stuff to your children who survive you, your children per stirpes, your issue per stirpes, your children by right of representation or your issue by right of representation. Each of your children will receive $250,000.
Case #2. You live a really, really long time. Your son who has four children dies before you do and your daughter with one child also dies before you do. Very sad, but it happens.
You leave your stuff to your children who survive you:
Your two living children would split your estate and receive $500,000 each.
Your son’s four children and your daughter’s one child get nothing.
You leave your stuff to your children per stirpes or your issue per stirpes:
Your living children would each get $250,000.
Your son’s four children would split their father’s $250,000 share and receive $62,500 each.
Your daughter’s child would get her mother’s share and receive $250,000.
You leave your stuff to your children by right of representation or your issue by right of representation:
Your living children would each get $250,000.
Your son’s four children and your daughter’s child would divide equally the remaining $500,000 and receive $100,000 each.
Which do you want? It is not a matter of right or wrong, but your choice. Most people feel strongly one way or another. This is a personal decision which you should know you are making by the language you use.
Take a look at your will or your trust and see what it says about how your stuff is going to be distributed after you are gone. If your will was drafted before April of 2000 and it says that your beneficiaries receive by right of representation, then your will or trust may not have the same distributions today as it did when it was drafted.
If you have a concern that your will or trust does not reflect your wishes, then you should make an appointment with your estate planning attorney and have your will or trust reviewed and updated so that it properly reflects your wishes. This should all be part of a regular review of your estate planning documents.
I recommend that you should review your estate planning documents on an annual basis. You may not want to change them every year, but you should at least review them to make sure they continue to reflect your wishes. There are changes in your family situations such as births, deaths, marriages and divorces. There are changes in your financial situation such as a job loss, a new job, the stock market goes up or the stock market goes down. There are also both tax and non-tax changes in the law. There should also be changes in your estate planning attorney’s experience. Attorneys should continue to learn new things as time goes on.
By keeping your estate plan updated on a regular basis, you can assure that you are in control of your property while you are alive and well, that you and your loved ones are provided for during your mental incapacity and when you are gone you can give what you have to whom you want when you want the way you want all while minimizing overall administrative costs.
Published edited March 21, 2010 in The Times Herald, Port Huron, Michigan as: It’s important to make a backup plan for will