The Use and Beauty of Per Stirpes

“Per stirpes” (from Latin: “by the roots” or “by the branch”) is a legal phrase that is appended to names in beneficiary designations (or sometimes has its own checkbox on those forms) and is used in legal documents to direct that a predeceased individual’s share should pass to that individual’s issue (children, and grandchildren, etc.) rather than to the remaining beneficiary(ies).  Importantly, the use of per stirpes does not potentially draw into the beneficiary designation the spouses of any of the beneficiaries – just their lineal descendants (children, grandchildren, etc).

To understand the power of the phrase, let’s think through what happens without it.  If a person has named their three children as equal beneficiaries (33.3% each) on, for instance, a life insurance policy, and one child dies before them, then in most circumstances that account will pass only to the surviving named children (now 50% each).  However, if that deceased child had children of their own, often account owners would prefer that the deceased child’s share passed to or for the benefit of their children (the owner’s grandchildren).  Most account owners think that this will happen by default, but for many types of accounts this is not the case – unless the per stirpes designation is made.

One thing to be careful of is that the per stirpes designation is not nuanced.  For instance, if in your estate plan you intend to leave assets to an individual’s non-adopted step-child, or to leave assets to some but not all of your grandchildren, the broad use of per stripes should be carefully considered.

Note that a per stirpes designation will not be available when you name someone as POD (“Payable on Death”) beneficiary of a bank account, may be available when you name someone as beneficiary on a non-retirement brokerage account, and is available for almost every non-governmental retirement and life insurance accounts. 

We always recommend that our clients review (and if necessary, update) the beneficiary designations on at least their retirement and/or life insurance accounts, to make sure that they use the per stirpes designation each time they name someone as beneficiary and want this quality to exist.  It is an easy thing to miss, and can have significant consequences.