Welcome to the Weekly SUMmary - 03/05/2021
Do you have an estate?
Some quick ways to determine if you have an estate are:
- Do you have money in your pocket?
- Do you have clothes on your back?
- Do you own a vehicle, or anything else that may have value to another person?
Congratulations, you have an estate. Now, obviously that's not a reason to start planning your estate (depends how big your pockets are, I guess). Once you start to accumulate significant assets, you should consider how your estate will pass to heirs. "Significant" can be different for everyone. You should consult with an advisor if you have questions in this process.
One thing that everyone should address in their own financial planning is how all of their accounts and insurance policies are set up regarding beneficiaries.
An option that most people likely overlook, see but do not understand, or think it may not pertain to them is Per Stirpes. The reason this may be overlooked is this may be a check box option next to each beneficiary you set up.
First, these people want you to figure out what your beneficiaries Social Security Number, Date of Birth, Telephone Number, and Address are, THEN they throw a Latin term at you at the end of the section with a small check box (as if anyone really knows what this means anyway...)
Wikipedia states the definition as:
Per stirpes (/pɜːr ˈstɜːrpiːz/; "by branch") is a legal term from Latin used in the law of inheritance and estates. An estate of a decedent is distributed per stirpes if each branch of the family is to receive an equal share of an estate. When the heir in the first generation of a branch predeceased the decedent, the share that would have been given to the heir would be distributed among the heir's issue in equal shares.1
Unless you're an attorney, you may need some interpretation. I will try to assist.
The gist of your options are:
- Standard beneficiary/no per stirpes - choose heir(s)/beneficiary(s), they receive assets based upon breakdown listed. (Example Below)
- John Doe has 2 kids, Andrew and Bill. John wants his insurance policy split in half at his passing. John passes. Andrew gets 50%, Bill gets 50%.
- John Doe has 2 kids, passes and only one child (Andrew) is surviving. That child, Andrew, receives 100% of the inheritance.
- Per Stirpes beneficiaries - choose heir(s)/beneficiary(s), as long as they survive, assets are split as directed/listed. If the heir/beneficiary is not alive/surviving, assets are split as directed to those surviving and to the deceased beneficiary's heirs, evenly. (Example Below)
- Jane Doe has 2 kids, both survive, same scenario as John Doe's first example.
- Jane Doe has 2 kids, Celeste and Deidre (2 children). Jane wants her insurance policy split evenly, but chooses per stirpes in case one child is no longer living when she passes and their children/heirs will receive the inheritance. Jane passes. Celeste receives 50%, Deidre is no longer living, therefore Deidre's portion passes to her two children evenly. Deidre's 50% is now Child 1 - 25%, Child 2 - 25%.
This post is for educational purposes only and not intended to be a recommendation or advice related to this subject. Waddell & Reed and its representatives do not offer tax or legal advice. If you have questions or would like to discuss, you should speak with the appropriate professionals. (03/21)