Referral On most beneficiary designation forms, buried near the bottom or tucked into a dropdown menu, there is a choice that most people skip past without reading. It asks something like: "If a beneficiary predeceases you, how should their share be distributed?" And the options — per stirpes, per capita, or by representation — are presented in Latin without explanation. Most people leave the default in place. That default may not match what they want. And in the wrong situation, it can completely disinherit a grandchild.
Beneficiary designations work cleanly when the named person is alive when the account owner dies. The money goes to them. Done. The problem is what happens when a named beneficiary dies first. If you named two adult children as equal 50/50 beneficiaries, and one of them dies before you do, there is a question: what happens to that 50% share? Does it go to your surviving child? Does it pass to your deceased child's own children (your grandchildren)? Or does it have no living recipient and default to your estate? The per stirpes or per capita election on the form determines the answer.
Per stirpes is Latin for "by the roots" or "by the branch." In this distribution model, when a named beneficiary dies before the account owner, that beneficiary's share passes to their own descendants — not to the surviving siblings. Using the example above: you named Child A and Child B as equal beneficiaries. Child A dies, leaving behind two grandchildren of yours. Under per stirpes, Child A's 50% passes to those two grandchildren (25% each). Child B still receives their original 50%. Per stirpes preserves the family branch. Your intention was that each child's family would receive their portion of your legacy. If one child predeceases you, their branch of the family — their children — steps into their place.
Per capita means "by the head." This model distributes the asset only among the surviving members of the designated group at the time of the account owner's death. There is no branch-preservation. When a named beneficiary dies before the account owner, their share is absorbed by the surviving beneficiaries. Same example: Child A and Child B are named 50/50. Child A dies. Under per capita, Child B receives 100% of the account. Child A's children — your grandchildren — receive nothing from this account. They are effectively disinherited from it. Per capita is simpler for financial institutions to administer. It also frequently produces outcomes the account owner would not have chosen, particularly in families with grandchildren.
Some states and some financial institutions offer a third option called "by representation." This is a hybrid model. The key difference from per stirpes shows up when multiple beneficiaries in the same generation have predeceased the account owner. Under per stirpes, each surviving branch of grandchildren inherits separately. Under by representation, if all beneficiaries in the first generation (your children) are deceased, the remaining assets are pooled and divided equally among all surviving grandchildren — regardless of which child they descended from. New York uses "by representation" as a default in some contexts. The difference between per stirpes and by representation only becomes significant when the generational dynamics are complex.
An estate planning attorney can review your existing beneficiary
Burner Prudenti Law — Per Stirpes vs. Per Capita; Sand Hill