One Beneficiary Mistake You Really Don’t Want to Make

Per capita or per stirpes? Ensure fairness across generations by choosing the right annuity or life insurance distribution method for your beneficiaries.

A yellow road warning sign reads "Oops!"
(Image credit: Getty Images)

Once you’ve bought an annuity or a life insurance policy and named your beneficiaries, you may never think about those beneficiary designations again. But that could be a big mistake.

If you get divorced and remarry but fail to change your beneficiary from your ex-spouse to your current spouse, your ex will receive the proceeds. Besides divorce, other life changes, such as marriage or the death of a loved one, are occasions to review beneficiaries.

Additionally, there may be new people in your life that you want to include — such as grandchildren. Maybe there’s a charitable organization that you wish to support.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Before making any changes, it’s important to understand how primary and contingent beneficiaries work.

If you’re married, your spouse is normally your primary beneficiary and your child or children are contingent. The contingent beneficiaries will receive the proceeds on your death if your primary beneficiary dies before you do or at the same time as you do.

While you should notify the insurer about the death of a primary beneficiary, even if you don’t, the proceeds will automatically go to your contingent beneficiaries.

Fairness across generations

If you have a number of grandchildren, the issue becomes more complex.

Suppose you’re married and have three adult children. The default is to name your spouse your primary beneficiary and name your children contingent beneficiaries who’ll all share equally in the proceeds.

Here’s where it gets complicated. Suppose child A has three children, child B has none and child C has two, for a total of five grandchildren.

What would happen if both your spouse and child C predecease you? In that case, unless you’ve set up your beneficiaries correctly, all the proceeds would go to your two surviving children. Child C’s two children would be disinherited.

That’s not what most people want.

Instead, you can specify that if one of your children is deceased that their share will go to his or her children. This is called a per stirpes distribution.

That means that each branch of the family will receive an equal share. If that’s what you want to do, you must request per stripes, because equal distribution (per capita) is the default.

Per stirpes designations are available from most but not all insurance companies.

Beneficiary designations trump your will: So get them right

Because annuities, life insurance policies and retirement plans list beneficiaries, they all bypass probate court. That means that your will won’t determine who gets the proceeds — which is why having the right beneficiaries is so crucial.

My brief video about using per stirpes is online at

A free quote comparison service with interest rates from dozens of insurers is available at or by calling (800) 239-0356.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Ken Nuss
CEO / Founder, AnnuityAdvantage

Retirement-income expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. Interest rates from dozens of insurers are constantly updated on its website. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities. More information is available from the Medford, Oregon, based company at or (800) 239-0356.