Keeping your beneficiary designations up to date is an important part of your overall financial plan. Your beneficiary choices determine how your accounts are distributed after your lifetime — ensuring your assets are passed on according to your wishes.
At Fidelity (and many other financial institutions), the default designation is per capita. But you also have the option to choose per stirpes, and the difference between these two approaches can be significant.
What Does Per Capita Mean?
Per capita means “by the head.” Under this option, each living, named beneficiary receives an equal share of your account.
- If one of your beneficiaries has passed away, their share is not passed on to their heirs.
- Instead, their portion is split equally among the remaining living beneficiaries.
Example: Per Capita
Imagine you name your three children — Alex, Beth, and Chris — as equal beneficiaries:
- If all three are living, each receives 33%.
- If Beth has passed away, Alex and Chris would each receive 50%.
- Beth’s children would not inherit directly under this approach.
What Does Per Stirpes Mean?
Per stirpes means “by the branch.” Under this option, a deceased beneficiary’s share passes down to their direct descendants, such as their children.
This allows your assets to “follow the family line” and ensures that your beneficiaries’ heirs inherit in their place.
Example: Per Stirpes
Using the same three children — Alex, Beth, and Chris:
- If all three are living, each receives 33%.
- If Beth has passed away, her 33% share passes to her children.
- If Beth had two children, each would receive 16.5%. Alex and Chris would still each receive 33%.
Which Option Is Right for You?
- Per capita (default): Simplifies distributions by keeping assets only among the surviving named beneficiaries.
- Per stirpes: Keeps a deceased beneficiary’s share within their family line.
Neither option is right or wrong — the best choice depends on your wishes for how your assets should be distributed.
Why This Matters
Beneficiary designations often override what’s written in a will or trust, so it’s critical to review them regularly. Major life events — such as marriage, divorce, the birth of a child, or the passing of a loved one — are important times to check your designations and make sure they still reflect your goals.
If you’d like to review or update your beneficiaries at Fidelity, you can do so easily online:
And of course, our team at Fairvoy Private Wealth is here to help you navigate these decisions as part of your broader financial plan.
Important Notice:
This information is general in nature and should not be considered tax or legal advice, which Fairvoy Private Wealth, LLC., does not provide. Always consult an attorney or tax professional regarding your specific legal or tax situation. Laws of a particular state may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and subject to change. The information herein may be subject to change by future legislation or further interpretation and/or guidance of new provisions.