Brenda Vingiello, Sand Hill Global Advisors CIO, joins ‘Squawk Box’ to discuss the latest market trends ahead of the opening bell. This content was produced
Choosing Your Legacy: Deciphering Per Stirpes Vs. Per Capita in Estate Planning
Published Date : July 30, 2024
Estate planning is a critical aspect of financial management that ensures your assets are distributed according to your wishes after you pass away. Among the many decisions you’ll make during this process is who to name as beneficiary of your retirement plan accounts. Before completing or updating any existing beneficiary designations, it is crucial to understand the differences between the terms ‘per stirpes’ and ‘per capita’ as they are commonly found on the paperwork. These legal provisions may dictate how your estate will be distributed among your heirs and can significantly impact how your legacy is preserved.
‘Per stirpes’ is a Latin term meaning ‘by roots’ or ‘by branch’. When you choose this method of distribution in estate planning, your assets are divided equally among your named heirs based on the branches of their family tree. If one of your direct heirs—or the named primary beneficiary—predeceases you, their share will be passed directly to their descendants, maintaining the intended division among family lines. As a simple example, let’s say you have two children: Adam and Betty. Adam has two children, Sam and Susan, and Betty has two children, Brian and Jane. If Adam and Betty are named as your primary beneficiaries, 50% to each of them, with per stirpes selected and Adam passes away before you, the allocation of your assets will be as follows: 50% to Betty, 25% to Sam, and 25% to Susan. Essentially, the share that would have gone to Adam is transferred equally to his children (your grandchildren), ensuring each branch of your family receives an equitable portion.
On the other hand, ‘per capita’ means ‘by head’ or ‘by person’. Under this distribution method, your estate is passed to your living beneficiaries in the same generation closest to you at the time of your death. Using the above example of your two children and four grandchildren, if your son Adam predeceases you, 100% would go to Betty. If Adam had living children, they would not benefit from any inheritance based on the per capita designation. It is important to note that Betty’s children wouldn’t benefit either unless she named them as beneficiaries in her own estate plan. Adam’s children wouldn’t receive any of your assets in this scenario. As you can see, care must be taken to ensure assets are left to the intended recipients, regardless of how life transpires after your estate plan is executed.
The choice between the per stirpes and per capita distribution methods depends largely on your family dynamics and goals for your estate. If you have multiple generations or wish to preserve your assets within specific branches of your family, which would benefit your grandchildren, per stirpes may be more appropriate. If your primary concern is ensuring each generation of your beneficiaries receives the maximum distribution from your estate, per capita might be the better choice. Per capita distribution is often simpler to administer, especially if your family structure is fairly straightforward. Per stirpes, while potentially more complex, allows for more precise control over how assets are distributed across generations. Additional attention should be given anytime you complete a beneficiary form (such as for an IRA or Roth IRA) as the option to designate per stirpes versus per capita is often overlooked.
Whatever your estate planning wishes are, it is important to make them thoughtfully, considering your family structure, goals for asset distribution, and legal implications. By seeking professional guidance from both your estate planning professional and your Wealth Manager, you can ensure that your beneficiary designations accurately reflect your wishes, thereby securing your legacy for future generations.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
Video Presentations
All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
Recent Posts
