Per stirpes vs. per capita is the choice of what happens to a beneficiary’s share if that person dies before you do. Per stirpes (“by the branch”) sends their share down to their own children. Per capita (“by the head”) splits their share among the other surviving beneficiaries and leaves their children with nothing from that account. Everything else about the comparison follows from that one difference.
How Per Stirpes Works
Each primary beneficiary stands for a branch of the family. If a branch’s named person dies before you, that branch’s share flows down to their children instead of sideways to the other beneficiaries. The surviving branches keep their original shares unchanged.
A concrete example. A parent holds a $600,000 life insurance policy naming three children as equal beneficiaries, so each branch is worth $200,000. One child dies before the parent and leaves two children of their own. Those two grandchildren split their parent’s $200,000 and receive $100,000 each. The other two children still get their full $200,000. No one’s share grew because of a sibling’s death.
This is why per stirpes is the default on many beneficiary forms. It prevents the accidental disinheritance of an entire line of grandchildren and treats each child’s family as a distinct, equal unit regardless of who outlives whom.
One timing rule matters here. Most states require a beneficiary to survive the account holder by at least 120 hours (five days) to inherit. A beneficiary who dies inside that window is treated as having predeceased the account holder, and under a per stirpes designation their share passes to their descendants just as in any other predeceased-beneficiary scenario.
How Per Capita Works
Per capita divides assets equally among the named beneficiaries who are alive when the account holder dies. If one has already died, their share doesn’t go to their children. The survivors absorb it.
A retirement account worth $400,000 names four beneficiaries, each slated for $100,000. One dies before the account holder. The remaining three split the full $400,000 and receive roughly $133,333 each. The deceased person’s family gets nothing from this account.
Per capita fits when you want to benefit specific individuals rather than family lines. It’s common with friends, siblings, or charities, where there’s no intent for the gift to pass beyond the named person. It also simplifies administration because the institution only deals with surviving claimants.
The risk is the mirror of the benefit. If a beneficiary dies unexpectedly, their children are completely excluded. This is where contingent beneficiaries matter: a contingent (or secondary) beneficiary inherits only if all primary beneficiaries are deceased, unreachable, or refuse the inheritance. With no contingent beneficiaries, an account whose named individuals have all died typically pays into the account holder’s estate, which means probate, legal fees, and delay.
Per Capita at Each Generation
There’s a third option many people don’t know about. Per capita at each generation is a hybrid adopted by the Uniform Probate Code and used as the default intestacy rule in a majority of states. It starts like per stirpes at the top, but treats everyone in the same generation equally when shares pass down.
The difference shows up in one specific situation. A parent names three children: Alice, Bob, and Carol. Alice is alive at the parent’s death. Bob and Carol have both died. Bob left three children; Carol left one. Under traditional per stirpes, Bob’s three children split Bob’s one-third (one-ninth each), while Carol’s single child gets Carol’s full one-third. The grandchildren walk away with very different amounts despite being in the same generation.
Per capita at each generation handles that differently. Alice still gets her one-third. The remaining two-thirds is pooled and divided equally among all four grandchildren, giving each one-sixth. The logic is that grandchildren in the same generation should be treated equally rather than having their inheritance depend on how many siblings they happen to have.
Not every financial institution offers this option on their standard form. If the form only lists per stirpes and per capita, you may need to write specific instructions in the additional notes section or work with the institution to customize the designation. It’s worth asking, especially when one child has significantly more children than another.
Which One Should You Choose
The decision tracks your intent. If you want each child’s family treated as an equal unit and you’d want grandchildren to inherit if their parent dies young, per stirpes matches that. If you want to benefit specific named individuals and are comfortable with their share going to the other survivors if one dies, per capita matches that. For families with uneven numbers of grandchildren where you want generational fairness, per capita at each generation is the closest fit.
Whichever you pick, name at least one contingent beneficiary. The contingent designation is what keeps the account out of probate when every primary beneficiary has died. A per stirpes designation with contingent beneficiaries provides the deepest safety net because assets can flow down multiple generations before running out of eligible recipients.
Traps That Can Override Your Choice
A beneficiary designation on a retirement account or life insurance policy carries more legal weight than a will. When the two conflict, the beneficiary form wins. A will that says “everything to my current spouse” does not override a 401(k) form that still lists an ex-spouse. That’s exactly why the following issues matter more than the per stirpes vs. per capita choice itself.
Spousal Consent on Employer Plans
Federal law imposes a hard rule on employer-sponsored retirement plans like 401(k)s and pensions. Your spouse is the default beneficiary, and naming anyone else requires your spouse’s written consent, which must acknowledge the effect of giving up the benefit and must be witnessed by a plan representative or notary public.1Office of the Law Revision Counsel. 29 USC 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity Without that consent, the designation is invalid and your spouse gets the money regardless of what the form says.
Divorce
Roughly half the states automatically revoke a former spouse’s beneficiary designation on accounts like life insurance and IRAs upon divorce. Those state laws do not apply to ERISA-covered plans. In Egelhoff v. Egelhoff, the Supreme Court held that ERISA preempts state statutes that try to revoke beneficiary designations on employer-sponsored retirement plans after divorce.2Legal Information Institute. Egelhoff v. Egelhoff If you divorce and forget to update your 401(k) form, your ex-spouse can legally collect the entire account when you die, even if your will says otherwise, even if you remarried. Most beneficiary disasters start here, and a five-minute form update prevents them.
Grandchildren Who Are Minors
Per stirpes often routes money to grandchildren, and sometimes those grandchildren are minors. Naming a minor directly creates an immediate problem: a financial institution cannot legally pay a large sum to a child. If no guardian of the minor’s financial estate has been appointed, the insurer or plan administrator holds the funds until a court appoints one, which takes time, costs money, and requires a bond in many jurisdictions.
The cleaner approach is to name a custodian under the Uniform Transfers to Minors Act, which has been adopted in every state. Instead of listing “Grandchild Jane Smith,” the designation reads something like “John Smith as custodian for Jane Smith under the [State] Uniform Transfers to Minors Act.” The custodian manages the funds until the child reaches the age of majority (18 or 21, depending on the state), and no court proceeding is needed. For larger amounts, or when you want more control over how the money is spent, naming a trust as the beneficiary gives more flexibility.
The Slayer Rule
Every state has some version of the slayer rule. A person who feloniously and intentionally causes the account holder’s death is treated as having predeceased them and cannot collect. A criminal conviction creates a conclusive presumption that the killing was felonious, but a conviction isn’t required for the rule to apply. Under per stirpes, the disqualified person’s share passes to their descendants just as it would if they had actually died first.
Keep the Form Current
Review your beneficiary designations at least once a year and after any major life event: marriage, divorce, the birth of a child or grandchild, or a beneficiary’s death. Confirm the percentages add up to 100%, confirm each beneficiary’s distribution method is marked correctly, and confirm you have at least one contingent beneficiary on every account. The per stirpes vs. per capita choice only works if the names on the form are still the ones you want.