Beneficiaries Flashcards
What is “per capita” with regard to beneficiary designations?
It means that a deceased co-beneficiary’s share of an estate is allocated to other co-beneficiaries, rather than to the children of the deceased beneficiary.
What is “per stirpes” with regard to beneficiary designations?
It means that a deceased heir’s share of an estate is passed to his/her surviving heirs in equal shares.
What is “per capita at each generation” with regard to beneficiary designations?
It is a modified version of per stirpes, where the all the children of all deceased beneficiaries receive equal shares of the deceased beneficiaries share(s) of an estate. Unlike straight per stirpes, it shifts more of the estate to the deceased beneficiary with the most children.
How is a “per capita” model implemented?
The grantor simply lists the co-beneficiaries by name in the will or trust. If when the grantor dies one of the co-beneficiaries has predeceased them, then the dead beneficiary’s share of the estate goes equally to the surviving co-beneficiaries (and not to the children of the deceased beneficiary).
How is a “per stirpes” beneficiary model implemented?
The grantor lists the co-beneficiaries with term “per stirpes” after their names. This indicates that the grantor wishes the share of any co-beneficiary that predeceases them to go to the deceased beneficiary’s surviving children.
How is a “per capita at the generational level” implemented?
Typically, rather than filling out a typical beneficiary form, the grantor writes “see attached” and then writes out a separate page with clear instructions on how to distribute assets to the children of any pre-deceased co-beneficiaries.
Which of the following is the legal default beneficiary distribution method?
Per capita.
How are surviving spouses of deceased beneficiaries treated under the per capita approach?
They are ignored. That is a surviving spouse of a deceased co-beneficiary will not receive the co-beneficiary’s share of the estate. To avoid this, grantors must avoid filling out the regular beneficiary form, write “see attached” and attach a detailed description of their wishes to include a spouse.
Which of following methods of passing assets to heirs work by “operation of law”:
- Beneficiary designation
- Joint Account with Rights of Survivorship
- Payable on Death accounts
All.
What is the disadvantage of listing a trust as the beneficiary of an IRA or other retirement account?
It complicates and can limit the tax deferral opportunities that are available to heirs.
Ed Slott recommends that IRAs be left to a trust:
- Never
- Almost never, and then only with good reason
- Most of the time
The complications and potential loss of tax deferral are the main reasons he argues against this strategy.
What does “Taking by Representation” with regard to beneficiary designations?
It is synonymous with per stripes
