Should children as beneficiaries be listed "per stripes" to assure their heirs receive their portion
Quick answer, probably yes.
Explanation: Your point is that if you name your two children, for example, as beneficiaries of a brokerage account, if one dies the other child takes all. If instead your beneficiary designation is "one half to my son John, or if he is not living or disclaims to his heirs per stirpes; and one half to my daughter Jane, or if she is not living or disclaims to her heirs per stirpes". If either child is not alive when you die (or disclaims -- says they don't want their share) that child's heirs will receive it. The phrase "per stirpes" can be illustrated as follows: Assume Jane has 2 children and John has five children. If the account had $100 and it was distributed per stirpes since both of your children pre-deceased you, Janes to children would share her $50 share (1/2 x $100)/2 or $25 each. John's five children would share his $50 ($100 x 1/2) share/5 ore $10 each. If you contrast "per stirpes" with another distribution scheme, "per capita" it will further clarify what per stirpes means. If your grandchildren were to all share the account per capita instead of per stripes, they would each receive $100/7 (5+2) grandchildren, or about $14.28 per grandchild.
With this background, if you want assets to pass "per stirpes" (and most parents seem to, but that doesn't mean its right or better), then yes, per stripes might work. But read on.
Don't assume its even that simple. Some states define the terms "per stirpes" differently. Some states use other terms like "by representation" -- hey, why keep this stuff simple!
Longer answer, it all depends (sounds like a lawyer!). You really need an overall estate plan to know how to designate beneficiaries. It may depend on what assets, family circumstances and more. In some instances perhaps a trust rather than a child shold be named. The trust might benefit your child, or if your child dies (or disclaims) his or her children (your grandchildre), etc.
Finally, be careful with beneficiary designations. Improperly done they can undermine an entire estate. Also, many institutions have encouraged beneficiary designations on regular brokerage accounts, not just IRAs, etc.
Another tip: whatever you do, make copies of the beneficiary designation documents. Its not uncommon for them to get lost (especially when your local bank has merged for the 10th time in two months!).
Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.