We hope that you have a trust and will to ensure that your assets are distributed according to your wishes after you pass. However, if you are like most Americans, some of your assets are distributed through your beneficiary designations, which you may have not thought about since opening up the account, retirement account, 401(k), IRA or SEP or taking out a life insurance policy. A word of warning: regardless of what’s in your trust or will, the beneficiary designation takes precedence.
Benzinga’s recent article addresses this question: “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?” Have you changed the beneficiary designations since the account or policy was first started? If you need to update your beneficiary designation, talk to the company responsible for maintaining the account and have them send you a form. Then call your estate planning attorney to determine who, a person, or what, a trust, should be named. We believe that this form should be completed by your estate planning attorney to make sure your beneficiary designation aligns and is consistent with your estate plan.
You should also name a contingent beneficiary to receive the account, in case the primary beneficiary passes away before you can update the beneficiary list. Without a listed contingency, your account designation goes to a default, based on the original agreement you signed and the state law.
With per capita distribution, all members of a particular group receive an equal share of the distribution. Within a will or trust, that group can be your children, all your combined descendants, or named individuals. Under per capita, the share of any beneficiary that precedes you in death is shared equally among the remaining beneficiaries. Within a beneficiary designation, per capita typically means an equal distribution among your children.
Per stirpes distribution uses a generational approach. If a named beneficiary precedes you in death, then the benefits would pass on to that person’s children in equal parts. Spouses are generally not part of a per stirpes distribution.
Assume that you had two children. With per stirpes, if one child were to precede you in death, the other child would receive half, and the children of the deceased child would get the other half.
Create a list of all your accounts that have beneficiary designations and keep it with the information on your estate plan. If you don't have a copy of the latest beneficiary designation form, write down the primary beneficiary, contingent beneficiary, and the date the beneficiary designation was last updated for each one.
Asset ownership and beneficiary designation alignment is the essential piece of any estate plan!
At Family Estate Planning Law Group, as part of our ongoing client care program we align, verify and continually track all of our client’s assets, so you can be assured they will be aligned with your estate plan before and after your death, this includes ensuring you have kept your beneficiary designations up to date.
Reference: Benzinga (December 26, 2018) “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?”