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California's Methods of Distributing Property in a Will or Trust

Suppose that Alice wants to create a will or trust that distributes $90,000 to her family after she dies. Alice had three children, Betty, Charlie, and David, all of whom have predeceased Alice. Betty had one daughter, Ethyl who is deceased. Ethyl has three living children: Kim, Liam, and Monte. Charlie had two children Freddie and Greta, who are still living. Freddie has two living children: Nancy and Olivia. Greta has no children. David had three children: Harry, who is deceased, Irene and Jimmy, who are living. Harry had one living child, Pete. Irene and Jimmy do not have children.

To summarize:

     Testator: Alice

     Children: Betty (deceased), Charlie (deceased), and David (deceased)

     Grandchildren: Ethyl (deceased), Freddie, Greta, Harry (deceased), Irene, and Jimmy

     Great Grandchildren: Kim, Liam, Monte, Nancy, Olivia, and Pete

Under the California Probate Code, there are three different methods of distributing property: (1) the default method, (2) by right of representation, and (3) per capita at each generation.

Default Method: The default rule splits property equally at the nearest generation in which there is a living member. A deceased member's share is then divided among his or her descendants in the same manner.

If Alice gives $90,000 to her descendants without indicating a method of distribution, then it will be split at her grandchildren's generation because there is no living member of her children's generation. Therefore, Freddie, Greta, Irene, and Jimmy will each receive $15,000. Ethyl's three children will each receive $5,000 (dividing her $15,000 share) and Pete would receive Harry's $15,000.

By Right of Representation: This method splits property equally among all living children and any deceased child survived by living descendants. The descendants of a deceased child take that child's share in the same manner.

If Alice gives $90,000 to her descendants by right of representation, then Betty, Charlie, and Harry's descendants each get an equal share ($30,000 each). Betty's share of $30,000 would have passed to Ethyl, but since she is deceased, Kim, Liam, and Monte will each receive $10,000. Charlie's children, Freddie and Gretta, will each receive $15,000. Irene, Jimmy, and Pete (via Harry) will each receive $10,000 from David's share.

Per Capita at Each Generation: This method splits property equally at the nearest generation in which there is a living member, like the default method. However, if a member of that nearest generation is deceased (whether they have descendants or not), their share is split equally among the remaining descendants of the testator whose ancestors did not receive any share of the property.

Under this method, Grandma Alice's $90,000 would be split into $15,000 at the grandchildren generation because this is the first generation with living descendants. Therefore, Freddie, Greta, Irene, and Jimmy will each receive $15,000. However, because Ethyl and Harry are deceased, each of their $15,000 shares will not pass to their children directly. Instead, the remaining $30,000 will be split equally among Ethyl's three grandchildren and Pete because they are descendants of Alice that, unlike Nancy and Olivia, do not have a parent or grandparent that is inheriting money from Alice. This means that Kim, Liam, Monte, and Pete will each receive $7,500.

Although the equity of each method is debatable, the simplest method is by right of representation. Most people also expect to inherit by this method because they anticipate property being split equally among children at each generation. For these reasons, it is often the preferred method. In order to ensure that a method other than the default method is used, a will or trust must specify the method preferred by the testator.

If you are interested in creating a will or trust, please contact our office for a personal consultation with an attorney.

References:

• Prob. Code, §§ 240, 245-247.

• California Will Drafting (3d ed. Cal. CEB) § 12.32.

About the Author: Daniel Evans is an associate attorney at Ruddell, Cochran, Stanton, Smith & Bixler, LLP. His areas of practice include buisness Law, estate planning, trust administration and probate, and real estate law.

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