Jay Archer established a trust that was to terminate upon the death of his last grandchild. Upon termination, the proceeds of the trust were to be distributed to his living great-grandchildren. It would seem simple to determine the amount to distribute to each living great-grandchild by dividing the trust proceeds by the number of living great-grandchildren. However, the language in the trust, which read that the property was to be distributed in equal shares per stirpes to the settlor’s then- living great-grandchildren and surviving issue of his deceased great-grandchildren. The problem is that equal shares and per stirpes have contradictory meanings.
Jay had three grandchildren, Peter, Janice and Ralph. He had four great-grandchildren when the trust terminated, two of which were Peter’s children, one was Janice’s and one was Ralph’s.
Under the term equal shares, each living great-grandchild would receive a fourth of the proceeds from the trust. The legal term sometimes used for this distribution is per capita. Under the term per stirpes, of the trust proceeds, Janice’s child and Ralph’s child would each receive one-third of the trust proceeds and Peter’s two children would each get one-sixth - that is - they would split their father’s one-third.
The problem of the combined contradictory terms in the trust Mr. Archer created must be resolved in a court case in which a judge determines how Jay intended the proceeds of the trust to be distributed. That determination would not be difficult and unpredictable. Different judges might come to different conclusions.
The problem in the Archer trust can be avoided by spelling out precisely what the creator of the trust or the will means to happen. The trust (or will) should read that the distribution is to be in equal sharesor per capita, if each living beneficiary is to take the same amount. Conversely, the trust or will should read that the distribution is to be “per stirpes” -from the Latin by the branch - or “a deceased beneficiary’s will be divided among that deceased beneficiary’s children.”
Caveat: Understanding the effects of “per stirpes” can be a difficult concept to grasp, underscoring the need to seek the advice of a lawyers experienced in drafting wills and trusts in creating these documents.
Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm in Fort Worth. She lives in beautiful Somervell County, near Chalk Mountain.