When gifting your estate, why stop at grandchildren?

From

Peter Townsend

Just how many generations of your descendants should you consider in your Will and is there an easy way to do it?

No one has ever said that to me before. My client had just remarked: “I expect to live to be one hundred”. He was deadly serious.

That may not have come as a complete surprise if my client had been 99, but in fact he was only 65 and I was therefore impressed with his optimism.

Not that this optimism was without foundation either. The actuarial tables have seen the life expectancy of Australians steadily increasing and with advances in medicine and our understanding of how to foster good health occurring almost daily it should not come as a surprise to hear a healthy Australian male of 65 say that he was intending to reach his century. Indeed Britain’s Daily Mail newspaper reported as far back as 2011 that the first person to live to be 150 had already been born.

The context of his remark was that his draft Will gave his estate to his children and if they pre-deceased him for any reason than to those children’s children. “I expect to have great grandchildren and even great great grandchildren so why should my Will stop with just grandchildren?” he asked.

It was a good question. Surprisingly there is already a quite simple and elegant way of dealing with this issue and it derives from the Latin term “per stirpes”.

“Per stirpes” translates loosely to “my roots”. In the context of a Will it refers to your beneficiaries. It means they inherit in a share equal to that of the individual they’re representing. It might appear in your Will as something like, “I leave XYZ to my then living descendants, per stirpes.”

Here’s how it works. Whatever bequest a parent would have been entitled to receive from your estate moves to their children if that parent dies before you. If you have two children, each of them might receive a one-half share of your estate. Your grandchildren will receive nothing — at least if their parents are living. But if one of your children should predecease you, their one-half share would pass in its entirety to their children.

If your child who is no longer living was the parent of three of your grandchildren, each of those grandchildren would receive an equal share of the amount their parent would otherwise have got – in this case 1/3 of the 1/2 share of your estate, or 1/6. Your other child would still receive their one-half share and your deceased child’s one-half share would be divided equally among her three children. One-half divided by three equals 1/6 of your overall estate, so that’s what each these three grandchildren would receive.

But by using ‘per stirpes’ we don’t stop there. If one of your grandchildren dies before you leaving children then those great-grandchildren would share equally the share which their parent, your grandchild, would otherwise have received and so on down the line until the gift is exhausted.

It’s not every day that an existing legal maxim deals with a material development in the law, but this is one such case and offers the peace of mind of knowing that all your family can be looked after no matter how many generations there are.

By Peter Townsend, Principal

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