Making Sense of Beneficiary Designations

A will is a good starting point to help ensure that your assets are passed on to your heirs according to your wishes. However, it’s important to specify beneficiaries for financial accounts and insurance policies on the appropriate forms, because they typically supersede instructions in a will.

In any document distributing assets to your heirs, a typical approach would be to name your spouse as primary beneficiary, with your children as contingent beneficiaries. If you are divorced or your spouse has passed away, you might leave your estate in equal shares to your children. (Keep in mind that minor children who are named as beneficiaries should generally have a guardian or trustee to control assets until they are old enough to manage them.)

But what happens in the unfortunate event that one of your children predeceases you? That depends on the language in your will or the beneficiary designation form, so it may be helpful to understand two common Latin terms.

Per stirpes (also called "by representation") literally means "by the roots," but it might be clearer to imagine the branches of the family tree. If one of your beneficiaries predeceases you, his or her share would be divided proportionately among his or her heirs upon your death.

Per capita literally means "by the head." If one of your designated beneficiaries predeceases you, the division of assets would depend on whether you defined the group as to children per capita or to heirs per capita (see below).

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