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The Difference Between Per Stirpes and Per Capita Beneficiary Designations Thumbnail

The Difference Between Per Stirpes and Per Capita Beneficiary Designations

Estate Planning

Beneficiary designations are an important part of estate planning. Despite what your will might say, beneficiary designations are going to drive where a significant amount (if not most) of your financial assets go. This holds true for virtually any financial account, ranging from your banking accounts (through payable-on-death or POD designations) to your life insurance policies, to your investment and retirement accounts.  

But while it’s important to have beneficiary designations in the first place, that might not be enough. For those of you who have contingent beneficiaries (such as grandchildren or nieces and nephews), there’s a distinction you should be aware of: that distinction is ‘per stirpes’ versus ‘per capita’ distribution.

This article won’t suggest either course of action (the right decision is what truly reflects your intent, and should probably complement the rest of your estate plan). However, this article aims to help illuminate the difference between these types of designations so that you can make a fully informed decision when updating your beneficiary designations.

Does everyone have to worry about this?

 Not everyone.  

 Let’s make that very clear. If you only have one heir (other than your spouse), then it really doesn’t matter. It also doesn’t matter if you plan to give your fortune to charity, or if you simply decide that it doesn’t matter (which happens more than I would have guessed).

 But if you have multiple children (and grandchildren), special needs situations, or just ‘normal’ to complex estate planning considerations, then you’ll probably want to know the difference.  

 Also, this distinction only really plays out if one of the beneficiaries pre-deceases the account holder. If all of the primary beneficiaries are alive when the account holder passes, then the account is simply distributed as outlined on file. Since this doesn’t happen, let’s get a better understanding of what each one means.

Per Stirpes (Latin for ‘by branch’)

Per stirpes distribution means that if a beneficiary predeceases the account holder, then any assets that would have gone to that person are distributed to that person’s heirs instead.

 Pointing out the Latin derivative (by branch) might make this easier to remember—keeping the money within ‘the branch’ of the deceased beneficiary’s family.

 Example:         John Smith has an IRA with $300,000. He has 2 children:  

Son #1: Adam-no kids

Son #2: Ben-2 children

 When John passes, then each son receives $150,000—this would hold true under either per stirpes or per capita distribution.

 Let’s now assume that Ben pre-deceases John, but Adam does not. Under per stirpes distribution, Adam would still receive his $150,000 share, but Ben’s share would now be divided equally amongst his two children:  $75,000 each.  

 Generally speaking, spouses are not considered when it comes to ‘per stirpes’ distribution. For example, if Ben predeceased John, then under ‘per stirpes’ distribution, Ben’s share would go to his children (or a trust established for the benefit of his children), not his spouse.

Per Capita (Latin for ‘by the heads’)

Per capita distribution means that if a beneficiary predeceases the account holder, then any assets that would have gone to that beneficiary are simply distributed to the remaining similar beneficiaries.  

 Remembering the Latin origin might help here as well—distributing the money to the ‘remaining heads’ of the family.

 In this scenario, if Ben were to pre-decease John, then Adam would receive the entire IRA distribution, while Ben’s children would receive nothing.  


The advice in this article stops here.  There are plenty of scenarios that could play themselves out, which are well beyond the scope of any article. That is why it is important to periodically revisit your estate planning (which includes beneficiary designations). At the very least, you should review this each time someone passes away, someone is born, or if there is another significant life change (such as a marriage or divorce).  

 Any advance planning should be done in consultation with your estate attorney, and should involve your financial advisor so that changes can be rapidly implemented. We do this with our clients routinely. If you would like to learn more about how we might be of service to you in this, or any regard, please contact us.  

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