II.E · The Individual Life Insurance Contract
Beneficiaries: per stirpes vs. per capita
These terms decide what happens to a share when a beneficiary dies before the insured.
Example: Bryan names his three children, Q, P and S, to share $1,000,000 equally. Q dies before Bryan and leaves two children.
Per stirpes (by the branch, by bloodline): Q's share passes down to Q's descendants. P gets about $333,333, S gets about $333,333, and Q's two children split Q's $333,333, about $166,667 each.
Per capita (by the head): the money is divided among the named beneficiaries who are still living. P and S get $500,000 each, and Q's children get nothing.
Remember
· Per stirpes = a deceased beneficiary's share passes to their descendants.
· Per capita = split equally among the surviving named beneficiaries.
· Example: per stirpes gives each branch 1/3; per capita gives P and S 1/2 each.
Study as cards ›Revocable vs. irrevocable beneficiaries, and the common disaster clause ›All study notes
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