IRA Beneficiary Designations | Torrance Memorial

Published on April 26, 2021

IRA Beneficiary Designations: Per Stirpes vs. Per Capita... What Does It All Mean?

IRA piggy bank

Beneficiary designations are required for all types of IRAs, 401(k), 403(b), 457(b), profit sharing, defined benefit, annuities and life insurance (all referenced as IRA for this article). Beneficiary designations are separate from and take precedence over the instructions in your will or trust. This allows for direct transfer to your named beneficiaries after you are gone.

An element not frequently discussed in establishing beneficiary designations is the per stirpes vs. per capita distribution. This element comes into play if one of your named beneficiaries precedes you in death. Per stirpes would distribute that beneficiary’s share to his/her children in equal parts. Per capita would distribute the deceased beneficiary’s share equally among the remaining beneficiaries.

Consider this example. Jane inherited the IRA of her husband John when he passed away. She designated their two children (son and daughter) as 50% (equal) beneficiaries. Both of Jane’s children are married and have two children. If Jane and her daughter are killed in a car accident, the per stirpes designation would distribute 50% of the IRA to her son and divide her deceased daughter’s 50% equally between her two children. The per capita designation would distribute 100% of the IRA to Jane’s son since he is the only remaining beneficiary. The deceased daughter’s children would not receive the 50% share.

This simple designation detail can have serious ramifications to your stated wishes if not addressed properly. Some beneficiary designation forms have check boxes related to per stirpes or per capita, but others do not. If you do not know what you previously designated, it is advised you review the beneficiary forms currently on file. Each of your beneficiaries can be listed as either per stirpes or per capita. If you do not select/write in an option on the form, your beneficiaries will be subject to the default option with the custodian.

Your estate attorney or financial advisor can help guide you through this process, or you can check directly with you IRA custodian and update the designations if needed. This may be the right time to update your beneficiary designation forms to ensure your wishes are followed after you are gone.


Gregory Schill, CFP®, is co-founder of The Advisory Group in Torrance. He is a member of Torrance Memorial’s Professional Advisory Council. Contact him at gschill@theadvisorygrp.com or 310-536-7111.

Securities and investment advisory services offered through FSC Securities Corporation, Member FINRA/SIPC, and a Registered Investment Advisor. Additional advisory services offered through The Advisory Group, a Registered Investment Advisor.The Advisory Group is not affiliated with FSC Securities Corporation.