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<\/div>\nToday I\u2019m sharing everything you need to know about Per Stirpes.<\/p>\n
In fact, this confusing Latin word recently saved our client from sending over $500,000 to the wrong beneficiary<\/strong>.<\/p>\n (And she didn\u2019t need an attorney to take action!)<\/em><\/p>\n If you want to ensure the right people inherit your hard-earned money, you\u2019ll enjoy today\u2019s article.<\/p>\n Per stirpes is a legal term used in estate planning to ensure the assets of a deceased person are distributed fairly among their family members. It stems from Latin, meaning \u201cby branch\u201d or \u201cby roots,\u201d signifying that each family branch should receive an equal share of the estate.<\/p>\n Per stirpes comes into play when one or more beneficiaries predecease the owner(s) of the estate. Put simply,\u00a0if a beneficiary dies before<\/em> you die, the deceased beneficiary\u2019s children inherit your money.<\/p>\n Without per stirpes, everything is passed to the remaining primary beneficiary.<\/strong><\/p>\n<\/div>\n It is essential to consider all aspects of your financial and personal situation when creating an estate plan. Including the per stirpes designation can help ensure your assets are distributed as you intended, maintaining fairness and clarity for your family and loved ones.<\/p>\n By considering the use of per stirpes when planning your estate\u00a0and beneficiary designations, you can have peace of mind knowing that your family\u2019s inheritance is well-planned and secure.<\/p>\n To understand how per stirpes works, consider the following example.<\/p>\n Grandma Gloria has a $1 million retirement account. Her only remaining family members are her daughter and granddaughter.<\/p>\n Right now, her daughter is named as the primary beneficiary on her retirement account.\u00a0 In other words, when Grandma Gloria dies, her daughter will inherit the account.<\/p>\n However, if the daughter dies before<\/strong><\/span> the grandmother, the retirement account would not<\/span> make it to the granddaughter.<\/p>\n That might make the granddaughter very sad.<\/p>\n More importantly, it might<\/em> make the grandmother sad that her intentions weren\u2019t carried out.<\/p>\n If, instead, the grandmother elects per stirpes \u2013 and her daughter dies before her \u2013 the money would go straight to the granddaughter.<\/p>\n Elect per stirpes on your retirement account beneficiary designations to ensure that your heirs\u2019 heirs receive their share.<\/strong><\/p>\n<\/div>\n Electing per stirpes ensures that your assets are distributed according to your wishes and provides a clear roadmap for your loved ones. By employing this method, you can avoid potential disputes and complications, ensuring your estate\u2019s distribution aligns with your intentions.<\/p>\n One important part of this planning is setting up your beneficiary designations.<\/p>\n What are beneficiary designations?<\/p>\n Beneficiary designations determine who gets your retirement account money when you pass away.<\/p>\n One example of how to set up your beneficiary designations \u2013 with two individuals receiving equal halves.<\/strong><\/p>\n<\/div>\n Your retirement accounts include your IRA accounts and your employer-sponsored retirement plans. This means:<\/p>\n Most married people opt for their spouse as their primary beneficiary.<\/p>\n If you do that, it means your spouse gets the money in your retirement accounts when you die.<\/p>\n This scenario is so commonplace that, if you are married and you don\u2019t<\/em> assign your spouse as the primary beneficiary, you will likely need some special paperwork to make that possible.<\/p>\n In other words, your spouse may need to sign a notarized document that says he\/she is okay with not<\/em> being the primary beneficiary on your retirement accounts.<\/p>\n Also, you will likely need to set up contingent beneficiaries for your retirement accounts<\/a>.<\/em><\/p>\n If you\u2019re married with kids, your contingent beneficiaries<\/a> might be your children. If your primary beneficiary passes away before you do, your money will go to your contingent beneficiaries.<\/p>\n Contingent beneficiaries inherit your assets if the primary beneficiary passes before you do.<\/strong><\/p>\n<\/div>\n A final consideration when setting up your beneficiary designations is whether to elect per stirpes or per capita.<\/p>\n Per capita is typically the default option on most retirement accounts if per stirpes isn\u2019t chosen.<\/p>\n Back to our example above, let\u2019s say that the grandmother still has a daughter and granddaughter\u2026but she also has a son.<\/p>\n The daughter and son are listed as 50\/50 beneficiaries on the grandmother\u2019s $1 million retirement account.<\/p>\n So, if grandma gets run over by a reindeer tomorrow, each would receive $500,000.<\/p>\n However, if the daughter gets run over first \u2013 and per capita was chosen by default \u2013 the $500,000 earmarked for the daughter will go to\u2026the son!<\/p>\n The son would have $1 million dollars in his pocket and the granddaughter would be left with nothing.<\/p>\n If you\u2019re setting up the beneficiary designations on your retirement accounts, you will be faced with this very question.<\/p>\n \u201cShould you use per stirpes<\/em>?\u201d<\/p>\n<\/blockquote>\n The right answer for you depends on several factors.<\/p>\n For example, do you want your money to pass to your beneficiary\u2019s heirs? It\u2019s possible this was your plan all along.<\/p>\n But, it\u2019s also possible you don\u2019t want your grandchildren to get access to your money.<\/p>\n One factor to consider is the age of the heirs who would receive the money via per stirpes.<\/p>\n For example, if you\u2019re looking at passing assets to your children (and your grandchildren via per stirpes), consider the grandchildren\u2019s ages.<\/p>\n Are the grandchildren minors? Would the grandchildren be able to manage your assets on their own?<\/p>\n These are not easy questions to answer.<\/p>\n This is why you may want to consult with a financial planner<\/a> and estate attorney to help choose your beneficiary designations.<\/p>\n Contact the bank or custodian where your retirement accounts are held (e.g. Fidelity, Vanguard, Morgan Stanley, etc.) and request a copy of your current beneficiary designations.<\/p>\n Review your current designations and do two things:<\/p>\n If everything looks good, your job is done. If things are in need of updating, move to step 2.<\/p>\n Every bank or custodian has a \u201cbeneficiary designation form.\u201d<\/p>\n If you need to make a change to your beneficiaries \u2013 including per stirpes or per capita \u2013 you need to contact your bank or custodian and request this form.<\/p>\n (You can also contact your financial planner<\/a> if you have one.)<\/p>\n With the beneficiary designation form in hand, you can make the appropriate changes to your beneficiary designations. It might look something like this:<\/p>\nWhat Is Per Stirpes<\/h2>\n
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<\/p>\nHow Per Stirpes Works (Example)<\/h2>\n
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<\/p>\nSetting Up Your Beneficiary Designations on Retirement Accounts<\/h2>\n
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Primary vs Contingent Beneficiaries<\/h3>\n
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<\/p>\nPer Stirpes vs Per Capita<\/h2>\n
What is Per Capita?<\/h3>\n
Should I Use Per Stirpes for My Beneficiary Designations?<\/h2>\n
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Step-by-Step: How to Elect Per Stirpes or Per Capita on Your Retirement Accounts<\/h2>\n
Step 1<\/h3>\n
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Step 2<\/h3>\n
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