Two Latin Words on Your Beneficiary Form Decide Whether Your Grandchildren Inherit Their Late Parent’s Share or Watch It Get Split Among the Aunts and Uncles

If you have a 401(k), an IRA, a life insurance policy, or a transfer-on-death brokerage account, pull up the beneficiary form. Two Latin phrases buried in the fine print, per stirpes and per capita, decide whether your grandchildren inherit their late parent’s share or watch it get absorbed by their aunts and uncles. Most families never confront this detail until a death makes the choice irreversible, and by then no estate attorney can undo it.

The Two Words That Rewrite Your Estate

The distinction is simple in theory and consequential in practice. If you name your three children as equal beneficiaries and one of them dies before you, per stirpes (Latin for “by branch”) routes that child’s one-third share straight down to their own children, your grandchildren. Per capita (Latin for “by head”) does the opposite: it cancels the deceased child’s share entirely and splits everything between the two surviving siblings, leaving the grandchildren with nothing. Same form, same three names, wildly different outcomes.

The default matters too. On most custodian and employer plan forms, leaving the designation field blank triggers either per capita or whatever tiebreaker the plan document specifies. That is how grandchildren get unintentionally disinherited by a form their grandparent filled out in five minutes during HR orientation.

Why the Form Beats the Will

A valid beneficiary designation on a qualified plan, IRA, annuity, or life insurance policy is a contract between you and the custodian. It overrides whatever your will says, full stop. ERISA governs 401(k)s and most employer plans, and the U.S. Supreme Court has twice enforced the named beneficiary on the form over competing state-law claims: in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), and in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009). State transfer-on-death statutes work the same way for brokerage accounts.

Your will controls probate assets. Your beneficiary form controls everything else, and that is almost always the larger pool of money for a typical retiree.

Where This Actually Shows Up

The per stirpes or per capita choice applies to traditional and Roth IRAs, 401(k) and 403(b) plans, TSP accounts, life insurance policies, annuities, HSAs, and transfer-on-death brokerage and bank accounts. According to Investment Company Institute data for the second quarter of 2026, IRAs held $19.9 trillion in assets and 401(k) plans held $10.8 trillion, part of a total U.S. retirement market worth $51.2 trillion. A single word on a single form is quietly directing the inheritance of trillions of dollars every year.

There is an additional wrinkle families should understand: grandchildren who inherit through a per stirpes designation are almost always non-spouse beneficiaries, which means they fall under the SECURE Act’s 10-year rule. The IRS finalized implementation rules in 2024, effective 2025, requiring most non-spouse beneficiaries to fully distribute an inherited IRA within 10 years of the original owner’s death, with annual required minimum distributions in years one through nine if the owner had already begun taking RMDs. Getting the per stirpes designation right puts assets in your grandchildren’s hands; understanding the 10-year rule tells them what to do with those assets once they arrive.

Who Should Care

If you have children and grandchildren, this matters. If you have named siblings, nieces, or nephews as beneficiaries and want assets to continue down their line if one predeceases you, this matters too. If you are single with one primary beneficiary and a clearly named contingent, the urgency is lower, but the contingent line still needs the same designation treatment.

Retirees with blended families carry the highest risk. Per capita can shift assets away from a deceased child’s children and toward a surviving spouse’s children from another marriage, an outcome most grandparents would find alarming. The only way to prevent it is a deliberate, written designation, not a conversation with your financial advisor.

Fixing It This Week

1. Pull every beneficiary form: IRA, Roth IRA, 401(k), old 401(k)s at former employers, life insurance, annuities, HSA, and any TOD or POD account.
2. Read the small print. Look for a checkbox or dropdown labeled per stirpes, by representation, lineal descendants, or per capita. If the field is blank, the plan’s default applies.
3. Decide per beneficiary. You can mark one beneficiary per stirpes and another per capita. The designation applies per line.
4. Name contingent beneficiaries too, and apply the same designation there.
5. Resubmit the form and keep a dated copy. Verbal instructions to your advisor carry no legal weight.
6. Re-review after any death, divorce, remarriage, or birth in the family.

The Catches Nobody Mentions

Not every plan honors per stirpes. Some employer 401(k) forms offer only per capita, or force any deceased beneficiary’s share to surviving named beneficiaries by plan rule, regardless of anything you write in the margin. Custodian language also varies: per stirpes, by right of representation, and by representation are not always identical terms under state law.

There is a second catch that trips up married 401(k) participants specifically. ERISA Section 205 requires written, notarized spousal consent before you can name anyone other than your spouse as the primary beneficiary of a 401(k) or similar employer plan. No spousal consent means the plan pays the spouse regardless of what the form says, so even a carefully drafted per stirpes designation can be nullified by a missing signature.

If your plan will not accept per stirpes, the standard workaround is to name a properly drafted trust as the beneficiary and let the trust document govern the distribution. Note that naming a trust as an IRA beneficiary requires careful drafting to qualify as a “see-through” trust under IRS rules, or the 10-year liquidation period applies to the trust itself. In any case, confirm in writing with the custodian that your designation was accepted. A form the plan quietly rejected is worse than no form at all.

Editor’s note: IRA and 401(k) asset figures were updated to Investment Company Institute Q2 2026 data, showing IRAs at $19.9 trillion and 401(k) plans at $10.8 trillion out of a $51.2 trillion total U.S. retirement market. A new paragraph was added covering the SECURE Act’s 10-year rule for non-spouse beneficiaries, now in full effect, and an ERISA Section 205 spousal consent requirement was added to the plan-specific catches section.

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