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.

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.

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.
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 https://www.youtube.com/watch?v=rOBK-nVYxgA.
A free quote comparison service with interest rates from dozens of insurers is available at https://www.annuityadvantage.com or by calling (800) 239-0356.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

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, Ore., based company at www.annuityadvantage.com or (800) 239-0356.
-
A Case Study in Mismatched Fund Returns
Stock Market Why do a fund's returns sometimes differ from its underlying index? A longstanding legal principle holds the key.
-
Love Travel and Pickleball? Turn Any Vacation Into a Pickleball Vacation
Travel Ideas Love travel and pickleball? Combine the two for a memorable trip, whether it's to a pickleball retreat or a fancy vacation home.
-
Retirement Reality Check: Four Risks You'll Want to Avoid at All Costs
There's no crystal ball for retirement planning, but the closest thing could be to consider the key risks you'll face in retirement and build a plan around them.
-
Eight Ways to Financially Plan Your Way Through Challenging Times
A chief wealth strategist makes some suggestions about how to better position yourself financially while coping with economic uncertainty.
-
Five Reasons Roth Conversions and Pensions Work Well Together
This financial planner unpacks why Roth conversions can save you big-time on taxes if you're a retiree with a pension.
-
The One Surefire Way to Keep Your Car Insurance Premium From Soaring
I'm an insurance expert, so I know from extensive experience: The more claims you file, the higher your car insurance premium. So maybe don't ask your insurer to fix that tiny scratch on your bumper.
-
What You Expect in Retirement vs What You Get: Where Reality Can Surprise You
A financial planner explores how your expectations for retirement can greatly differ from reality — and how you can plan for that.
-
What's Up With the 10-Year Treasury Bond: Four Financial Experts Weigh In
A financial professional and three colleagues explain the fluctuations in the 10-year Treasury bond and what investors should do.
-
Time to Spring-Clean Your Finances: A Financial Professional's Four Steps to Tidy Them Up
A midyear review of everything from spending to saving, with adjustments as needed, can set you on track to financial security. Plus, don't forget to check in on your workplace benefits.
-
Why a Law Firm Secretly Recording Client Conversations Is Wrong (and Illegal)
A law firm that has been recording client conversations without the clients' knowledge or permission and has threatened employees if they speak out faces legal and ethical challenges.