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Selecting Beneficiaires: Per Stirpes Vs. Per Capita

When selecting beneficiaries for your IRA, there are many things that you must take into consideration.These are all important things to consider and discuss with your family and your CPA.

Do you want to name multiple primary beneficiaries?

Who will you name as contingent beneficiaries?

Should you name a Trust or other entity as your beneficiary?

If you name a Trust as your beneficiary, are you limiting your spouse’s options?

If you are naming multiple primary or contingent beneficiaries, you will need to decide if you want the money to be divided on a Per Stirpes or Per Capita basis.

So what’s the difference?

Let’s say you have two primary beneficiaries and one of them is deceased at the time of your death, but you have not updated your beneficiary list. Would you want the deceased beneficiaries portion to terminate and go completely to the living beneficiary or would you want the deceased beneficiaries portion to go to the deceased’s heirs?

If the beneficiaries are to share in a distribution “per stirpes,” then the living member in the class of beneficiaries who are closest in relationship to the person making the distribution will receive an equal share.

If the beneficiaries are to share in a distribution “per capita,” then all of the living members of the identified group will receive an equal share. However, if a member of the identified group is deceased, then a share won’t be created for the deceased member and all of the shares of the other members will be increased accordingly.

If you have questions about this, please contact a CPA or Tax Attorney.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.