Who Inherits If Your Beneficiary Dies Before You? Per Stirpes vs. Per Capita

Naming a beneficiary answers an important question: Who should receive this asset when I die?

But a complete estate plan needs to answer a second question: What happens if that person dies before you?

For retirement accounts, life insurance policies, and other assets with beneficiary designations, the answer may depend on two unfamiliar terms: “per stirpes” and “per capita.” Understanding the difference can help you avoid unintentionally leaving someone out.

Per Stirpes Preserves a Family Branch’s Share

A per stirpes designation generally allows a deceased beneficiary’s descendants to receive the share that beneficiary would have received.

For example, suppose you name your two children, Anna and David, as equal beneficiaries of a $600,000 account. David dies before you, leaving three children.

Under a per stirpes designation, Anna would receive her $300,000 share. David’s three children would divide his $300,000 share, receiving $100,000 each.

The purpose is to preserve David’s family branch’s portion of the inheritance. His children take his place rather than having his share redirected to Anna. Financial institutions may provide a specific election on their beneficiary forms to accomplish this result.

Per Capita Can Produce a Different Result

Per capita means “by the head.” On many beneficiary forms, it means that a deceased beneficiary’s share is divided among the surviving beneficiaries in the applicable group.

Using the same example, if the account provides for distribution to the surviving named children, Anna would receive the entire $600,000. David’s children would receive nothing from that account.

That may be exactly what the account owner wants. But it can also come as a surprise to someone who assumed that grandchildren would automatically inherit their deceased parent’s share.

The wording matters. “Per capita” can operate differently depending on how the beneficiary group is defined, and “per capita at each generation” is a separate distribution method. Always review the institution’s actual terms rather than relying on the label alone.

Your Will May Not Change the Account’s Instructions

A carefully drafted will does not necessarily solve an outdated beneficiary designation.

Assets payable directly to designated beneficiaries generally pass under the applicable account or policy arrangements rather than through the will. If your will leaves everything equally to your children, but your beneficiary form names only one child, the will generally does not rewrite that designation.

Florida does have rules addressing deceased beneficiaries under wills. Section 732.603, Florida Statutes, can create a substitute gift for the descendants of certain deceased relatives unless the will expresses a contrary intent. Section 732.611 also generally applies per stirpes distribution to gifts under a will to descendants and other multigeneration classes.

Those rules should not be treated as a substitute for properly completing a retirement account or insurance beneficiary form. The documents need to work together.

Contingent Beneficiaries Serve a Different Purpose

Naming a contingent beneficiary is useful, but it does not necessarily accomplish the same thing as selecting per stirpes.

A contingent beneficiary generally receives the asset if no primary beneficiary qualifies to receive it, subject to the account’s terms. If one primary beneficiary survives, the institution may redistribute the deceased primary beneficiary’s share among the surviving primary beneficiaries instead of paying it to a contingent beneficiary.

If your goal is for each child’s descendants to inherit that child’s share, ask whether the designation actually provides that result. Simply listing grandchildren as contingent beneficiaries may not be enough.

Think About How Younger Beneficiaries Would Receive the Money

A designation that directs money to grandchildren should also address their ages.

Per stirpes identifies who receives a share; it does not, by itself, create a trust or appoint someone to manage the inheritance. If a potential beneficiary is a minor, additional planning may be needed.

Florida law permits advance nomination of a custodian under the Florida Uniform Transfers to Minors Act. Depending on your goals, a properly drafted trust may offer another way to provide management and distribution instructions. The appropriate arrangement should be coordinated with the particular asset and its beneficiary requirements.

Review the Actual Forms

When reviewing your estate plan, obtain copies of your current beneficiary designations and consider:

• If a child dies before you, should that child’s descendants receive the share?

• What happens if a beneficiary dies without descendants?

• Are the primary and contingent beneficiaries still appropriate?

• Could a minor become entitled to receive money?

• Has the institution accepted and recorded your intended instructions?

At Burns Legal Solutions, PLLC, we help clients coordinate their estate-planning documents and beneficiary designations so they reflect the same intentions. If you are unsure what would happen to an account after a beneficiary’s death, a review now can help prevent an unintended result later.