Understanding the importance of beneficiary designations can determine whether some family members receive an inheritance or are unintentionally left out, says a recent article from Kiplinger, “Per Stirpes vs. Per Capita: The Beneficiary Rules Most Families Have Never Heard Of.”
Most families have never heard the terms per stirpes or per capita. However, understanding the difference is important to ensuring the right people aren’t left out of an intended inheritance.
Assets, including IRAs, 401(k)s, life insurance and annuities, don’t go through probate. Instead, they pass directly to the named beneficiaries. These accounts aren’t subject to the directions in a will or a trust unless the trust is specifically listed as the beneficiary.
Most people assume this is a simple thing: name a beneficiary, then name a contingency beneficiary and it’s done. What happens if one of the beneficiaries dies before the account owner? The answer: it depends upon whether the account has been set up per capita or per stirpes.
Per capita means “by head.” If one beneficiary dies before you, the share is redistributed equally among the remaining beneficiaries. Per stirpes means “by branch.” In a per stirpes beneficiary designation, the deceased beneficiary’s share passes to their children—your grandchildren—and is divided equally among them.
Let’s say Janet inherits an IRA after her husband, Joseph, passes away. She decides to name her son and daughter as equal beneficiaries on the IRA. Each child has two children of their own. The daughter dies, and then Janet herself dies.
Another common misconception is how living trust assets are distributed. Beneficiary designations operate separately, and they take precedence over a will or trust. Even the most carefully written estate plan can be overridden by outdated or incomplete beneficiary forms.
Be aware that a trust doesn’t govern retirement accounts unless the trust is named a beneficiary. This strategy needs to be coordinated with an estate planning attorney to ensure that it achieves the results you want.
Finally, financial institutions don’t all follow the same default rules. Some default to per capita, while others allow per stirpes only upon specific request. In some institutions, per stirpes might not be available.
To avoid unintended outcomes, regularly review beneficiary accounts for all retirement accounts, insurance policies and annuities. Find out if the accounts are set up per stirpes or per capita. Ask the account custodian what the default distribution is. Make sure beneficiary designations align with your overall estate plan.
Talk with your estate planning attorney if you have any questions about how your estate will be distributed, including assets going through probate and those outside of probate.
Reference: Kiplinger (March 16, 2026) “Per Stirpes vs. Per Capita: The Beneficiary Rules Most Families Have Never Heard Of”
