Distributions – Watch Your Language!

90k

As the executor it is your duty to comply with the wishes of the testator as written in the Will.  It is therefore important that you understand what certain terms mean.

The residue of the estate is “all the stuff left over” after the specific bequests (piano to John, trumpet to Jane) have been made and all the bills and estate expenses have been paid.  These assets (or their cash value) are to be distributed according to the terms of the Will. A couple of trip-up legal Latin phrases to keep in mind here are “per stirpes” and “per capita” – they outline who is entitled to what.

In the above example, the residue of Tom’s estate is equal to $90,000.  Tom had three children:  Lana, Scott and Jim.  Lana was the only one of the three alive when he died.  Lana has one child – Dale, Scott had two children – Anne and David, and Jim had one child – Tina.

If the residue is to be distributed “in equal parts per stirpes” each branch of Tom’s family is to receive an equal share.  In this case, the value of the residue ($90,000) is to be divided into three equal parts of $30,000 – one part to each of Lana, Scott and Jim.  BUT since neither Scott nor Jim was living at the time of Tom’s death,* each share will be passed down to the next generation – Anne and David will share Scott’s portion, and Tina will inherit Jim’s entire $30,000.  (*Tom could have amended his Will on the death of each child if this result was not what he had wanted.)

If the distribution is to be “to my issue in equal parts per capita” each person alive (“capita” means “head”) will receive an equal amount without regard to whether they are a child, grandchild or great-grandchild (and yes, any living great-great-grandchildren would be included as “issue”).  So Tom’s $90,000 would be divided into five equal portions of $18,000 each.

In this case, both Lana and Tina would inherit $12,000 less than they would in a per stirpes distribution, Anne and David would each receive an additional $3,000 and Dale, completely left out of the per stirpes distribution would inherit $18,000.

On another note, the phrase “to my children alive at the time of my death” means exactly that.  The children, not any of their issue.  In this case Lana, the only child still living at the time of Tom’s death, would inherit the entire residue of $90,000.

Bottom line:
Executors:  When you are distributing the assets of an estate you must do so in the way the Will says.
Testators: When you are making a Will make sure that your Will says what you actually mean.

 

 

About Penny Schneider

Penny Schneider, TEP is a Trained Professional Organizer who works specifically with executors on estates. On the 1st of each month Penny writes short pieces about things important to executors (what to do when) and on the 15th with things an executor might find (what to do with). Penny assists clients throughout Toronto, York Region and the surrounding area.
This entry was posted in Administrative Details, Beneficiary, Executor, Wills and tagged . Bookmark the permalink.

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