THE IMPORTANCE OF “PER STIRPES”
I often help my clients name the beneficiaries on their various retirement and non-retirement accounts. Upon the death of the owner of each account, the asset will be transferred to the named beneficiaries without requiring probate court to get involved.
Unfortunately, the forms can be quite confusing. Whenever there are multiple beneficiaries receiving equal shares, let’s say the three children, the owner has two choices: 1) joint or, 2) per stirpes. If a child dies before the owner, leaving children, this distinction is very important. Under the “joint” selection, the asset would be given to the surviving two children. Under the “per stripes” selection, 1/3 of the asset would be given to the deceased child’s children in shares of equal value.
In summary: does the owner want to cut out the grandkids (joint) or give to the grandkids (per stirpes)? It is important to make the proper choice.
Note: If a child dies before the owner, leaving no children, that child’s share would be given to the surviving children of the owner, whether joint or per stirpes.