Beneficiary Designations & Per Stirpes Explained

“Welcome to WealthGrow, where we discuss building wealth, securing your future, and making informed financial decisions. My name is Stuart Cameron, OSJ Branch Manager and Financial Advisor with Wharton Investment Consultants and today we’re diving into an area of planning that often gets overlooked — but can have some of the biggest impacts on how your money and assets are passed down.

We’re talking about beneficiary designations and something called per stirpes.

Now, I know those terms might sound a little intimidating or even like legal jargon, but by the end of this episode, you’ll understand what they mean, how they work, and most importantly, why getting them right can be crucial for your family’s financial well-being.”

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Transcript

[00:00:00] Speaker 1: Today's podcast [00:00:02] Speaker 1: is beneficiary designations [00:00:04] Speaker 1: and per stirpes [00:00:05] Speaker 1: explained. [00:00:07] Speaker 1: Welcome to Wealth Grow, where we discuss building wealth, [00:00:10] Speaker 1: securing your future, [00:00:12] Speaker 1: and making informed [00:00:14] Speaker 1: financial decisions. [00:00:15] Speaker 1: My name is Stuart Cameron, [00:00:17] Speaker 1: OSJ branch manager [00:00:19] Speaker 1: and financial advisor with Wharton Investment Consultants. [00:00:23] Speaker 1: And today, we are diving into an area of planning that often gets overlooked, [00:00:28] Speaker 1: but can have some of the biggest impacts on how your money and assets are passed down. [00:00:34] Speaker 1: We are talking about beneficiary [00:00:36] Speaker 1: designations [00:00:37] Speaker 1: and something called per stirpes. [00:00:41] Speaker 1: Now I know these terms might sound a little intimidating [00:00:44] Speaker 1: or even like legal jargon, [00:00:46] Speaker 1: but by the end of this episode, you'll understand what they mean and how they work. And most importantly, [00:00:54] Speaker 1: why getting them right can be crucial [00:00:56] Speaker 1: for your family's [00:00:58] Speaker 1: financial well-being. [00:01:01] Speaker 1: So let's start with the basics. What's a beneficiary [00:01:04] Speaker 1: designation? [00:01:06] Speaker 1: Simply put, a beneficiary is the person [00:01:09] Speaker 1: or people [00:01:11] Speaker 1: or even an organization [00:01:13] Speaker 1: that you named to receive your assets when you pass away. [00:01:17] Speaker 1: Think Life Insurance policies, [00:01:19] Speaker 1: retirement accounts like IRAs or four zero one ks's, [00:01:22] Speaker 1: and even some bank accounts. [00:01:25] Speaker 1: Why is this so important? [00:01:27] Speaker 1: Because beneficiary designations [00:01:30] Speaker 1: usually override what's written in your will. [00:01:33] Speaker 1: That means that if your will says one thing, but your retirement account names someone else as the beneficiary, [00:01:39] Speaker 1: the account passes to the person listed on that designation form, [00:01:44] Speaker 1: not the person in your [00:01:47] Speaker 1: will. Example, [00:01:48] Speaker 1: imagine you wrote a will ten years ago, leaving everything to your spouse, [00:01:53] Speaker 1: but your IRA still exists, still lists your ex spouse [00:01:58] Speaker 1: as the beneficiary from from years ago. [00:02:00] Speaker 1: Guess who gets the account? [00:02:03] Speaker 1: The ex spouse. [00:02:05] Speaker 1: Beneficiary designations [00:02:06] Speaker 1: control. [00:02:07] Speaker 1: Period. [00:02:09] Speaker 1: The key point, keeping designations up to date is one of the simplest [00:02:14] Speaker 1: but most powerful steps you can take in the state planning. [00:02:19] Speaker 1: There are a few different types of beneficiaries you should know about. [00:02:23] Speaker 1: The primary beneficiary [00:02:25] Speaker 1: is the first in line to inherit. [00:02:29] Speaker 1: Contingent [00:02:29] Speaker 1: or secondary [00:02:31] Speaker 1: beneficiary. [00:02:32] Speaker 1: The backup [00:02:33] Speaker 1: who inherits if the primary beneficiary [00:02:36] Speaker 1: has passed away or can't accept the asset. [00:02:41] Speaker 1: Specific birth versus percentage [00:02:44] Speaker 1: splits. You can leave 100 to one person[00:02:47] Speaker 1: or split among multiple beneficiaries, [00:02:50] Speaker 1: like fifty fifty between two children. [00:02:54] Speaker 1: Here's a real life scenario. [00:02:56] Speaker 1: You might list your spouse as the primary beneficiary for your Life Insurance, [00:03:00] Speaker 1: but then you also named your children as contingent beneficiaries. [00:03:04] Speaker 1: So if something happens to both of you and your spouse, [00:03:08] Speaker 1: the children inherit. [00:03:12] Speaker 1: Before we jump into per stirpes, [00:03:14] Speaker 1: let's pause to cover some common mistakes people make with beneficiary [00:03:19] Speaker 1: designations. [00:03:21] Speaker 1: Forgetting to update after life events [00:03:24] Speaker 1: like marriage, [00:03:25] Speaker 1: divorce, [00:03:27] Speaker 1: birth of a child [00:03:28] Speaker 1: or death of a beneficiary. [00:03:32] Speaker 1: Not naming a contingent beneficiary, [00:03:34] Speaker 1: leaving the account to pen potentially [00:03:37] Speaker 1: go through probate. [00:03:40] Speaker 1: Naming naming minor children directly, [00:03:43] Speaker 1: which which can cause legal complications [00:03:45] Speaker 1: since minors can't legally inherit [00:03:48] Speaker 1: without a guardian or trust. [00:03:52] Speaker 1: Not coordinating with your overall estate plan. [00:03:55] Speaker 1: For example, [00:03:57] Speaker 1: your will leaves assets to your children equally, [00:04:00] Speaker 1: but your beneficiary [00:04:02] Speaker 1: designations [00:04:03] Speaker 1: accidentally leave everything to just one child. [00:04:10] Speaker 1: Okay. Now let's tackle this Latin term you'll often see on beneficiary forms, per stirpes. [00:04:16] Speaker 1: Per stirpes literally means by branch [00:04:19] Speaker 1: or by the roots of the family tree. [00:04:23] Speaker 1: Here's what it does. If you leave an account to your children per stirpes [00:04:28] Speaker 1: and one of your children passes away before you, [00:04:31] Speaker 1: their share doesn't disappear. [00:04:33] Speaker 1: Instead, it goes to their children, your grandchildren. [00:04:37] Speaker 1: Example, [00:04:39] Speaker 1: you have three children, [00:04:40] Speaker 1: each set to inherit one third of your IRA. [00:04:44] Speaker 1: One child passes away before you. [00:04:47] Speaker 1: Without per stirpes, [00:04:49] Speaker 1: the other two children split [00:04:51] Speaker 1: split the IRA fifty fifty. [00:04:54] Speaker 1: With per stirpes, [00:04:56] Speaker 1: your deceased child's one third [00:04:58] Speaker 1: passes down to their kids, [00:05:01] Speaker 1: your grandchildren. [00:05:03] Speaker 1: This ensures [00:05:05] Speaker 1: that each branch of your family line is represented [00:05:08] Speaker 1: even if someone in that branch predeceases you. [00:05:13] Speaker 1: Now a common source of confusion, [00:05:15] Speaker 1: the difference between per stirpes and per capita. [00:05:19] Speaker 1: Per stirpes, [00:05:20] Speaker 1: the share follows the family branch. [00:05:24] Speaker 1: Per capita, [00:05:25] Speaker 1: the share is divided equally among surviving beneficiaries [00:05:29] Speaker 1: no matter [00:05:30] Speaker 1: what branch they're from. [00:05:33] Speaker 1: Example, [00:05:34] Speaker 1: three children listed, [00:05:36] Speaker 1: one passes away[00:05:38] Speaker 1: leaving two grandkids. [00:05:40] Speaker 1: Under per stipis, [00:05:42] Speaker 1: those grandkids split their parents share. [00:05:46] Speaker 1: Under per capita, [00:05:47] Speaker 1: the surviving two children each get $50.50 [00:05:51] Speaker 1: and the grandkids get nothing. [00:05:55] Speaker 1: So why does all this matter? [00:05:57] Speaker 1: Because these decisions directly affect [00:06:00] Speaker 1: where your hard end money goes. [00:06:03] Speaker 1: Here are three simple steps you can take [00:06:05] Speaker 1: after listening today. [00:06:08] Speaker 1: review all your beneficiary [00:06:09] Speaker 1: designations [00:06:11] Speaker 1: on retirement accounts, insurance, [00:06:13] Speaker 1: and bank accounts. [00:06:15] Speaker 1: Make sure they reflect your current wishes and family [00:06:30] Speaker 1: thanks for joining me on this episode of Wealth Grow. [00:06:33] Speaker 1: If you found this helpful, please subscribe [00:06:35] Speaker 1: and leave us a review. [00:06:38] Speaker 1: Got questions or a topic you'd [00:06:43] Speaker 1: or at Wharton IC [00:06:45] Speaker 1: at like us to cover? Reach out on social media Cetera Networks dot com. [00:06:48] Speaker 1: Thanks for listening, [00:06:49] Speaker 1: And until next time, [00:06:51] Speaker 1: plan wisely, [00:06:52] Speaker 1: invest smartly and build a legacy that lasts. [00:06:56] Speaker 1: These podcasts are brought to you by Wharton Investment Consultants. [00:07:00] Speaker 1: 5010 Kamby Drive, Wilmington, Delaware, [00:07:04] Speaker 1: 199808. [00:07:07] Speaker 1: Telephone, [00:07:08] Speaker 1: (302) [00:07:09] Speaker 1: 239-2111. [00:07:13] Speaker 2: Securities offered through Cetera Wealth Services, [00:07:16] Speaker 2: LLC, [00:07:17] Speaker 2: member FINRA [00:07:19] Speaker 2: SIPC. [00:07:21] Speaker 2: Advisory services offered through Cetera Investment Advisors LLC, [00:07:25] Speaker 2: a registered investment adviser. [00:07:28] Speaker 2: Cetera is under separate ownership from any other named entity. [00:07:32] Speaker 2: The views depicted in this material are for information purposes only and are not necessarily those of [00:07:39] Speaker 2: Cetera Wealth Services, LLC. [00:07:42] Speaker 2: They should not be considered specific advice or recommendations [00:07:45] Speaker 2: for any individual. [00:07:47] Speaker 2: Neither Cetera Wealth Services, [00:07:49] Speaker 2: LLC, [00:07:50] Speaker 2: nor any of its representatives may give legal or tax advice. [00:07:55] Speaker 2: All investing involves risk, including the possible loss of principal. [00:08:00] Speaker 2: There is no assurance that any investment strategy will be successful. [00:08:05] Speaker 2: The opinions contained in this material are those of the author and not a recommendation [00:08:10] Speaker 2: or solicitation [00:08:11] Speaker 2: to buy or sell investment products. [00:08:14] Speaker 2: This information is from sources believed to be reliable, [00:08:18] Speaker 2: but Cetera Wealth Services [00:08:20] Speaker 2: LLC [00:08:21] Speaker 2: cannot guarantee or represent that it is accurate or complete.