Per Stirpes vs. Pro Rata

There are two main ways to distribute assets from an estate or trust: per stirpes and pro rata. Unfortunately, the difference between these two terms can be difficult to understand. But it does not need to be. In this article, I break down what each term means and the difference between the two.

Per stirpes means that if a beneficiary dies before the distribution, your beneficiary’s children will still get the distribution. Pro rata (or per capita) means that if a beneficiary dies before the distribution, that beneficiary’s portion is split up equally among other beneficiaries.

What does “per stirpes” mean?

The term per stirpes literally means “by branch.” The word “branch” here refers to a branch of a family. In other words, when you leave assets to someone per stirpes, you are actually leaving the assets to that person’s family branch. Let’s look at example to explain.

Imagine that in your will, you leave you sister Janet $9,000, per stirpes. Janet has three children. But Janet passes away before you do without you ever updating the will. What happens to the $9,000? Because you left the money per stirpes, the money passes on to Janet’s children (her family branch). Her children now each inherit $3,000. But what happens if one of those children had also died before you did? Well, let’s imagine that just that happened to Janet’s oldest son William, who had two children. Now William’s two children split up William’s $3,000 share, each getting $1,500. They get the money because a per stirpes distribution keeps going down the family branch to the next level whenever someone dies, with the children inheriting their parent’s share.

What does “pro rata” mean?

The term “pro rata” means “in proportion.” This means that a pro rata distribution is always equal, unlike the per stirpes example above where children got $3,000 and some grandchildren got $1,500. To understand how it works, let’s consider the above example again but with a pro rata distribution. You leave your sister Janet $9,000, but she dies before the distribution. Janet has three children, but her oldest son William has died as well, leaving behind two children of his own. Under the pro rata distribution, the $9,000 now gets split up equally between Janet’s two surviving children and William’s children get nothing. If Janet had only one surviving child, that child would have gotten everything! And if Janet had no surviving children, then all of Janet’s grandchildren would have split up the $9000 equally. Notice though how in every pro rata scenario the distribution is always equal. Every person who receives any money at all gets the exact same amount as everyone else.