Understanding Per Stirpes and Per Capita

Posted by Ernest P. Valliere on September 10, 2013

When you name a friend or family member as a beneficiary of your life insurance policy—whether it’s a term policy or whole life policy —you do so with the intention of that individual getting the percentage of the death benefit you’ve allotted them.

Unfortunately, some beneficiaries do not outlive insured individuals. If your beneficiary dies and you haven’t named contingent beneficiaries, this can leave your death benefit in the hands of your estate, which may mean it won’t be allocated as you would have wished.

Using Per Stirpes and Per Capita beneficiary designations can help you exert control over your death benefit proceeds even if one of your beneficiaries dies.

  • Per Stirpes: Per stirpes literally means, “by branch.” A per stirpes beneficiary designation allows the heirs of any deceased beneficiaries to inherit that beneficiary’s portion of the death benefit and split it among themselves.
  • Per Capita: Per capita’s literal translation is, “per each head.” With a per capita beneficiary designation, the named beneficiaries who are still living each receive their allotted share of the death benefit. Once those shares are paid out, the remaining funds are divided equally among all of the heirs of the deceased beneficiaries.

Example: Let’s say you have named four individuals as your beneficiaries (A, B, C and D), and each of these individuals is meant to inherit 25% of your $1,000,000 death benefit.

Suppose that individual A passes away before you and leaves one child. Individual B passes away before you and leaves three children.

In a per stirpes arrangement, Individuals C and D—who are still living, original beneficiaries—will each receive their 25% of the death benefit ($250,000 each). The single child of individual A will receive his/her 25% ($250,000) and the three children of individual B will receive and split their 25%. Dividing that $250,000 amongst the three children means that each will end up with about $83,333.

In a per capita arrangement, Individuals C and D will still each receive their 25% ($250,000 each) but the three children of individual B and the one child of individual A will split the remaining 50% or $500,000. This will give each of the four children $125,000, which means the child of individual A receives less than he or she would under per stirpes and the children of individual B receive more.

To learn more about designating beneficiaries on your life insurance policy, call SBLI at 1-800-438-7254.

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