- Life insurance payments to an individual is the default method, with the policyholder specifying the individual beneficiaries on the policy
- From Latin, stirpes means “by branch” rather than “by per capita.”
- It sounds complicated, but it simply means that the inheritance follows the family tree (for each passenger) if the specified beneficiaries die before the policyholder
You probably don’t know these terms offhand, but if you’ve been looking to set up a last will, testament, or living trust, they’ll become familiar in no time.
Per passenger and per capita does not affect your policy while it is in effect. Instead, these common life insurance terms relate to the beneficiaries and how the benefit money will be disbursed when the time comes. See our guide on How to choose a life insurance beneficiary.
Below, we’ll decipher the rhetoric in the per-commuter vs. the individual squabble and help you decide which one best fits your needs.
What is the difference between per capita kneeling vs per capita?
To break down the meaning per passenger versus per capita, think of life insurance payments as a nightclub. If you have a beneficiary per capita, it is working in name only, in which case the bouncer at that particular club will not let anyone in unless his name appears on the list of beneficiaries.
If you buy life insurance for each case, the bouncer can let a few people through depending on who they are (usually grandchildren), ensuring that there isn’t one person dancing the night away with all the money.
Per capita life insurance is completely dependent on each surviving beneficiary and is not a friend of generations. If you are named but not present to claim it, your stake is dipped in the whole, and the whole amount is divided based on the number of named recipients still on the table.
If you have a wife and a child, which are your only allotments, you’ll probably be fine with that outcome when it comes to life insurance for families. Whoever stays gets everything. But in larger groups, it’s not so simple.
Examples of labels for each stirrup
What is the beneficiary designation for each stirps? Let’s go through the same scenario and play in different ways. This is the life insurance trick – imagine all the possible options and plan for as many as you can.
In this scenario, you have three adult children, David, Charles, and Anne. The boys haven’t settled down yet, but Ann has two children, Josh and Bella. Josh, like his uncles, is still a rowdy, but Bella, like her mom, has settled down and had a baby of her own.
So you’re with three children, two grandchildren, and one great-grandchild. It’s very likely that you’re the prime candidate for naming the payee by all the fanfare, and here’s why:
- Scenario A: David, Charles and Anne survive you. Your policy pays a third for each.
- Scenario B: I stopped you. One third goes to David, one to Charles, and the third that Anne got will now be split in half, and one-sixth of the initial sum will go to Josh and Bella. Thus, Branch Ann got its share.
- Scenario C: David and Anne survived you, but Charles died. As Charles had no offspring, there was no offshoot to be provided, so Anne and David would each receive half of the total compensation.
- Scenario D: David, Ann, and Ann’s son Josh before you. David had no children, so his branch was removed from the equation. Thus, the amount is split between the Charles and Anne branches, Bella, as the next representative of the Anne branch, receiving half of the compensation, while Charles receives the other half.
The ultimate purpose of designation for each occupant is to create a future-proof property that does not need to be modified in the event of rebirth or early death of the beneficiaries. As a result, this classification is often used in estate planning for those with growing families.
If each stirrup seems to fit your situation better, be sure to make that clear to your attorney. Otherwise, you may find yourself searching through the estate documents if the beneficiary passed first.
Examples of per capita distributions
Let’s look at some examples of per capita distributions in order to get a more comprehensive view of the per capita vs noise debate.
We’ll take the same position from above, but this time I’ve designated David, Charles, Ann, Josh, and Bella as equal beneficiaries so that they get the one-fifth share. This time we’ll take a peek at what happens if you allocate distributions to “living descendants, per individual”.
- Scenario A: All 5 survive you. They divided the share equally at 20% each, and 60% of the total went to Anne and her children.
- Scenario B: I stopped you. The four remaining beneficiaries receive equal distributions of 25% each, 50% to Anne’s children.
- Scenario C: David preceded you. The other four beneficiaries receive equal distributions of 25% each, meaning that 75% of the amount went to Anne and her grandchildren due to the appointment.
- Scenario D: Ann and Josh have outdone you. Bella and her surviving uncles receive 33.3% each. In this scenario, per capita and per stirps would have paid identically.
“Per capita” is Latin for “with the head,” signifying designation as being by the named individual. In such scenarios, all remaining named beneficiaries divide the total death benefit. Entries are not created for representatives of any beneficiary who has died since the document was written and notarized. Sometimes, this option is chosen to avoid intentionally giving it to certain undesirable individuals, as might happen under passenger allotment.
For example, when the potential beneficiary is a minor, a single share can be the easiest solution for those who do not intend to worry about pesky spouses, ex-spouses, or unwanted guardians gaining access to funds.
However, consider all possible outcomes and learn more about them How to name a minor child as a life insurance beneficiary before making a decision.
How does per capita moving labels work
Latin for “by branch,” the designations per stirpes allow you to name not just one individual but an entire branch of your family as patron. This policy anticipates unforeseen situations, such as the death of the beneficiary in front of the policyholder, and ensures that the correct outcome continues to apply.
For example, imagine that Joe has three sons, Bob, Rob, and Steve, and each brother also has three sons. However, if Joe names Bob, Rob, and Steve as beneficiaries without assigning distributions to each of the stirrups, each of the three brothers must be alive at the time of Joe’s death in order to receive his share of the payments.
So if Steve succeeds, Bob and Rob split the death benefit fifty-fifty. Steve’s three sons, in turn, don’t see a dime from Joe’s payment, though this was likely not Joe’s intention.
Now imagine the same scenario, only Joe sets the labels for each passenger. Now, if Steve passes before Joe, the one-third share destined for Steve will find its way to his children, where it will again be divided three ways between his three sons. This allows Joe to continue to provide for his family’s needs as intended, even when the unexpected happens and Steve passes away first.
One important note is that the per-passenger designations apply to children, not spouses. In the above scenario, even if Steve (as beneficiary) had a widow who survived him, all of the money left over from Joe (deceased) would pass directly to Steve’s children.
Life insurance quotes are always free.
Secured with SHA-256 encryption
How To File A Life Insurance Claim With All Streeps Versus An Individual
Remember that estate planning is no small feat. The time you spend making succinct decisions now can save time and heartache in the stressful moments ahead. Whether it be tomorrow or twenty years from now, the time will come when the beneficiaries file a life insurance claim which includes an individual or per-passenger share allotment, and the disbursement is made.
What works best for your design of what needs to happen? Compare Per Stirps vs Per Capital Life Insurance Claims Below:
- An individual share policy gives you direct control over who can make a life insurance claim but at the cost of adjusting your policy with each major change.
- Per stirpes gives you the freedom to keep things simple, define a breakdown by family tree and allow beneficiaries and their descendants to file claims and receive benefits.
You should be aware that life insurance assigns each of the beneficiary spouse control of the inheritance in the event that it passes to a minor child or descendant who cannot legally control the funds.
What is per streps vs per capita? In conclusion
Is every buzz better than one share? This depends on you, your family and your preferences. Life insurance is the most lucrative option for moving wealth from one party to the other, and the way forward should vary based on your family’s needs. Speak with your agent and/or attorney to choose the right policy for you.
Frequently Asked Questions
What does per capita mean in the beneficiary form?
Literally “by head” in Latin, it is the identification of a particular person by name as the beneficiary.
Are All Stirps a Good Idea?
Maybe. Per stirpes eliminates the need to make adjustments to add or remove beneficiaries by name, and instead issues payments “by branch” to the beneficiaries’ heirs or descendants.
What is an example for each stirps?
Imagine that Jake has two children, Monica and Jason, who also have two children. If Jake leaves his assets divided equally “to his descendants, per stirrup,” and Jason dies before Jake does, half of Jake’s assets pass to Monica, while the other half is divided between Jason’s two children.
Is life insurance per passenger versus per capita taxable?
Life insurance is taxable in some cases. For example, if there is a child you decide to skip when cashing in, there is a tax for that. Skipping generations is a direct money transfer and can result in its own penalty. Make sure to consult with your attorney to plan accordingly.
Life insurance quotes are always free.
Secured with SHA-256 encryption
Editorial Tips: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective third party source for all things life insurance. We update our website regularly, and all content is reviewed by life insurance experts.