Modern Per Stirpes vs. Classic Per Stirpes

“Per stirpes” is a legal phrase which means (in the estate administration arena) “by representation”. It is used in state law to divide assets for decedents without a will; it is likewise used in wills to divide property by the testator.

A recent Nebraska estate provides an example of a common family situation, and how “per stirpes” could be interpreted, and how “per stirpes” should be interpreted.

In the Estate of Evans, the decent died intestate, without a surviving spouse, children, parents, or siblings. One sibling predeceased leaving two living daughters, another sibling predeceased leaving one living son.

Under Classic (or strict, or English) per stirpes, the decedent’s property is divided into two shares, because the decent has living relatives from two predeceased brothers. Under Modern (or American) per stirpes, the decedent’s property is divided into three shares for the three living nieces and nephews.

The distinction between the two methods of interpreting per stirpes is the generation at which the division is made. Under Classic per stirpes, the division is made at the decedent’s generation; under Modern per stirpes, the division is made a the first generation that has surviving issue.

The Modern per stirpes in the Nebraska case was correct, and really benefits the nephew who gets 1/2 of the estate instead of 1/3.

The case is covered by Wealth Management here.

See Estate of Evans, 20 Neb.App. 602, 827 N.W. 2d 314 (March 12, 2013)


How to distribute excess tax payments — 2014

Trusts have the option (under IRC §643(g)) to treat any portion of a Federal payment of estimated tax made by a trust for any taxable year as a payment made by a beneficiary of the trust. The election to allocate must be made on or before the 65th day after the end of the tax year by filing Form 1041-T.

March 6

(The 65th day of 2014 is March 6. See related post here.)

The amount is treated as paid by the beneficiary on January 15 of the following tax year (for the purposes of calculating underpayment of estimated taxes); by making an election now, the tax will be treated as paid on January 15, 2014, and can be taken by the beneficiary as a credit against 2013 taxes.

This election may also be made by an estate, but only in its last taxable year.

This election may be useful for trusts which unexpectedly have little or no tax liability last year, or after distributions were made causing the tax liability to shift from the trust to the beneficiary.

New York allows a similar election with regards to NYS estimated tax payments made. The election and allocation must be made on Form IT-205-T. This form must be filed within 65 days of a trust’s year end (just like the Federal election).

Citation: IRC §643(g)

Tax Return Due Dates (2013)

April 15

Fiduciary income tax returns are generally due on the 15th day of the 4th month after the end of the tax year [IRC §6072(a)]. For trusts and calendar year estates, that date is April 15th.

In the previous two years, the filing deadline was pushed back due to the April 15th deadline falling on a weekend or a holiday. This year, the due date is a Monday.

Fiduciaries who are unable to complete an income tax return by April 15th can apply for an automatic extension for five additional months to complete the return; the extended returns will be due September 16th this year, because September 15th is a Sunday.