The Four Possible Outcomes

Per Stirpes vs. Per Capita — The Critical Difference

This distinction determines whether your grandchildren inherit their parent's share — or receive nothing:

• Per Stirpes ("by the branch"): If a beneficiary predeceases you, their share passes to their children in equal parts. Your grandchildren step into their parent's place and inherit what their parent would have received. The family branch is protected.
• Per Capita ("by the head"): If a beneficiary predeceases you, their share is divided equally among all remaining living beneficiaries at the same level. Your grandchildren from that branch receive nothing — the other beneficiaries simply get larger shares.

What Happens to Beneficiary Designations When a Beneficiary Dies

Beneficiary designations on life insurance, retirement accounts, and POD/TOD accounts have their own rules — separate from your trust or will:

• No contingent named: The asset reverts to your estate and goes through probate. The financial institution cannot honor a designation that names a deceased person with no backup.
• Contingent named: The contingent beneficiary receives the asset directly — no probate, no court involvement.
• Per stirpes election on the designation form: Some financial institutions allow you to elect per stirpes distribution directly on the beneficiary designation form. This means the deceased beneficiary's share automatically passes to their children — even without naming them individually.
• Trust named as beneficiary: The asset flows into the trust, which then distributes according to the trust's per stirpes or contingency provisions — giving you the most flexibility and the most control.

How to Protect Against This in Your Plan

A complete, gap-proof estate plan addresses the predeceased beneficiary scenario at every level:

• Name contingent beneficiaries on every account. Every life insurance policy, IRA, 401(k), brokerage account, and bank account should have at least one contingent beneficiary named on the designation form.
• Use per stirpes language in your trust and will. Explicitly specify that distributions are per stirpes — so that a deceased beneficiary's share automatically passes to their children without requiring a trust amendment.
• Elect per stirpes on beneficiary designation forms. When the financial institution's form offers this option, always elect it. If the form doesn't offer it, name the beneficiary's children as contingent beneficiaries explicitly.
• Name a final residuary beneficiary. If all named beneficiaries and their descendants predecease you, specify a final recipient — often a charity or institution — so the asset never reverts to your estate without direction.
• Update after any beneficiary's death. When a named beneficiary dies, update every relevant document and designation promptly. A deceased person left on a designation creates administrative problems and potential probate.

Common Mistakes

• No contingent beneficiaries anywhere. Single-level beneficiary designations — one person named, no backup — are the most common setup and the most vulnerable. A predeceased beneficiary with no contingent creates immediate probate exposure.
• Leaving a deceased beneficiary on file. Some people know a beneficiary has died but never update the designation, assuming "the trust handles it." The designation controls for that account — a deceased name on file creates a claim problem at the institution.
• Not specifying per stirpes in the trust. A trust that says "distribute equally to my children" without per stirpes language may leave grandchildren with nothing if their parent predeceases the grantor.
• Assuming the financial institution follows per stirpes by default. Most don't. Per stirpes must be explicitly elected on the designation form or explicitly stated in the trust document that is named as beneficiary.
• Failing to update after the death of a family member. Estate plan reviews should always be triggered by the death of any named beneficiary, trustee, executor, or agent.

Real-Life Example