Beneficiaries: Per Stirpes versus Per Capita
Per Stirpes and Per Capita are legal terms used in the law governing inheritance and estate. These designations are used as part of account beneficiary designations and/or wills to determine how the assets are distributed if a beneficiary passes away ahead of the account owner or testator.
Common Assets Passed by Beneficiary Designation
- Life Insurance Policies
- Retirement Plans (such as 401(k) Plans, IRAs, and 403(b) Plans)
- Annuities
- Health Savings Accounts
- Deferred Compensation Plans
- Investment Accounts with Transfer on Death (TOD)
- Bank Accounts with Payable on Death (POD)
Per Stirpes
Latin for “by branch” or “by root”
If one of a client’s primary beneficiaries pre-deceases them, the deceased beneficiary’s share would pass to their heirs. For example, if Helen’s children are her primary beneficiaries and one of them, Joe, pre-deceases her, Joe’s share would go to Joe’s children (Helen’s grandchildren).
Per Capita
Latin for “by the heads”
If one of a client’s primary beneficiaries pre-deceases them, the deceased beneficiary’s share would be split evenly amongst the surviving primary beneficiaries, typically of the same class. For example, if Bob’s children, Sam, Laura, and Mary, are his primary beneficiaries and one of them, Laura, pre-deceases him, Laura’s share would be split equally between Sam and Mary, not passing to Laura’s heirs.
Most beneficiary forms default to either a Per Stirpes or Per Capita designation. It is important that clients understand the stark differences to make intentional decisions about how they want their estate distributed, especially in complicated scenarios spanning mulitple generations.
Vicus Capital is neither a law firm nor a certified public accounting firm and no portion of the content should be construed as offering or disseminating specific legal or accounting/tax advice.
For Use with the General Public. Financial Planning and Advisory Services offered through Vicus Capital, Inc., a federally Registered Investment Advisor.
