Naming a per stirpes IRA beneficiary tells your custodian that if one of your named beneficiaries dies before you do, that person’s share should pass down to their own children rather than getting swept up by your other surviving beneficiaries. The Latin phrase means “by the branch,” and it keeps each family line’s portion intact across generations. Getting this notation right on the beneficiary form matters more than most people realize, because the form itself controls where the money goes, not your will.
What Per Stirpes Actually Does
When you add per stirpes next to a beneficiary’s name, you’re building a backup plan for that person’s share. If they predecease you, their portion doesn’t disappear and doesn’t get absorbed by the other beneficiaries. It flows down to their own children in equal shares. Each branch of your family tree keeps its intended piece of the account.
This is different from a per capita designation, where every surviving heir at the same generational level splits the account equally regardless of family branch. Under per capita, if you named three children and one died leaving two grandchildren, those two grandchildren would share equally with your two surviving children, each person getting one-fourth. Under per stirpes, your two surviving children each keep their one-third, and the deceased child’s two kids split the remaining one-third between them.
Most IRA custodians follow this branching logic automatically once the notation is on file. Vanguard, for example, distributes assets equally among the surviving members of the first generation of descendants closest to the account holder, then splits a deceased member’s share among that member’s own children.1Vanguard. Inherited Retirement Account Beneficiary Identification Form The same logic applies to both traditional and Roth IRAs.
A Practical Example With Real Numbers
Say you have a $900,000 IRA and name three children as equal beneficiaries per stirpes: Mary, John, and Jim. All three survive you. Each receives $300,000.
Now change one fact. Mary dies before you, leaving two children of her own. Under per stirpes, John and Jim still receive $300,000 each. Mary’s $300,000 share passes to her two children, who each receive $150,000. Mary’s kids don’t stand on equal footing with John and Jim. They inherit only what would have been their mother’s branch.
Under a per capita distribution, the math looks very different. The four surviving people would each receive $225,000, and Mary’s branch would end up with $450,000 total across two grandchildren, more than John or Jim receive individually. That redistribution is exactly what per stirpes prevents.
If a deceased beneficiary leaves no living descendants at all, their share typically gets redistributed among the other surviving branches at the same generational level. If Mary had died without children, John and Jim would each receive $450,000.
How To Add Per Stirpes to Your Beneficiary Form
Every IRA custodian requires a beneficiary designation form, and that form is where per stirpes lives or dies. You’ll need the full legal name, date of birth, Social Security number, and relationship for each primary and contingent beneficiary.2J.P. Morgan Asset Management. IRA Beneficiary Designation Form Some forms include a per stirpes checkbox next to each beneficiary. If yours doesn’t, write “per stirpes” next to the beneficiary’s name. That handwritten notation carries legal weight.
Without the per stirpes language, most custodians default to per capita treatment. This is where people accidentally disinherit grandchildren. If your form just says “my children, equally,” and one child has already died, the custodian sends the entire balance to the surviving children with nothing flowing down to the deceased child’s kids.
For families with complicated structures, some custodians accept custom beneficiary language drafted by an attorney. The legal department reviews the document to confirm it includes enough detail to identify and locate every potential heir. Custom language still needs the same core data points for each individual. Many firms now accept digital submissions through online portals, but confirm the per stirpes notation was recorded by requesting written confirmation, and keep that confirmation somewhere your family can find it.
The Form Overrides Your Will
This is the single most misunderstood point in IRA planning. The beneficiary designation on file with your custodian controls who gets the money, not your will. If your will says “divide everything equally among my three children” but your IRA form names only one child, the IRA goes entirely to that one child. Courts consistently enforce the custodian’s records when a valid beneficiary form exists.
The reason is structural. An IRA is a contract between you and the custodian, and the beneficiary designation is part of that contract. It operates outside of probate entirely.3Internal Revenue Service. Retirement Topics – Beneficiary That’s one of the advantages: your heirs don’t need court approval to claim the funds. But it also means a stale or incorrect form can unravel years of careful planning. Review your beneficiary designations whenever your family circumstances change, and treat the form as the controlling document it is.
Divorce and Remarriage Can Break Your Plan
Divorce is the most common wrench. More than 40 states have some form of revocation-upon-divorce statute that automatically removes an ex-spouse as beneficiary on IRAs and similar accounts. About half of those states make the revocation automatic once the divorce is final. In the remaining states, your ex-spouse stays on the form until you actively change it. Either way, the safest move after a divorce is filing an updated designation immediately rather than relying on state law.
Remarriage creates a different trap. If you’ve named your children per stirpes and then remarry without updating the form, your new spouse has no claim to the IRA at all. Unlike a 401(k) or pension governed by federal ERISA rules, an IRA does not automatically protect a surviving spouse. ERISA plans require your spouse’s written consent before you can name someone else as beneficiary. IRAs have no such federal requirement. You can name anyone you want without your spouse’s knowledge or approval. That flexibility cuts both ways: a surviving spouse can be completely shut out if the account holder never updated the form.
When Per Stirpes Sends Money to Minor Grandchildren
A per stirpes designation can push IRA assets down to grandchildren who are still minors, and that creates an immediate practical problem. A child under 18 cannot legally own an IRA or sign the paperwork to open an inherited account. If you haven’t named someone to manage the funds on the child’s behalf, the family will need a court proceeding to appoint a guardian of the estate. That means legal fees, delays, and a judge making decisions about your money.
The cleaner approach is to designate a custodian under the Uniform Transfers to Minors Act on the beneficiary form itself. A UTMA custodian can manage the inherited IRA without court involvement. The custodianship terminates when the child reaches the age specified by state law, which is 21 in most states, though some states allow the transferor to set a later age up to 25.
For larger accounts, a trust may offer more control. A conduit trust passes all IRA distributions through to the child as they’re received; an accumulation trust lets the trustee hold distributions inside the trust for management and creditor protection. The tradeoff is complexity and cost.
Tax Rules the Beneficiaries Will Face
Distributions from an inherited traditional IRA are taxed as ordinary income to the beneficiary. Whatever the original owner would have owed, the heir now owes. Timing matters, because a large distribution in a single year can push a beneficiary into a much higher bracket than they’d normally occupy.
Inherited Roth IRAs work differently. Withdrawals of contributions are always tax-free, and withdrawals of earnings are also tax-free as long as the Roth has been open for at least five years. If the account is younger than five years at the owner’s death, earnings withdrawn before that mark are taxable.3Internal Revenue Service. Retirement Topics – Beneficiary
The 10-Year Rule
Most non-spouse beneficiaries who inherited an IRA in 2020 or later must empty the entire account by December 31 of the year containing the tenth anniversary of the owner’s death. Whether annual withdrawals are required during that window depends on when the original owner died relative to their own required minimum distribution age:
- If the owner died before RMD age, no annual distributions are required. The beneficiary can withdraw any amount at any time, as long as the account is emptied by the end of year 10.4Federal Register. Required Minimum Distributions
- If the owner died after RMD age, the beneficiary must take annual distributions each year, with the remaining balance out by the end of year 10.
Grandchildren who inherit through per stirpes are subject to these same rules. A common mistake is taking only the minimum each year, which leaves a large balance that must come out in year 10 as a single taxable hit. Spreading withdrawals more evenly across the decade almost always produces a better tax result for inherited traditional IRAs.
Certain “eligible designated beneficiaries” can still stretch distributions over their own life expectancy: a surviving spouse, a minor child of the account owner (not grandchildren), a disabled or chronically ill individual, and anyone no more than 10 years younger than the deceased owner.3Internal Revenue Service. Retirement Topics – Beneficiary Grandchildren who inherit through per stirpes generally do not qualify, so the 10-year rule applies to them.
Disclaiming a Share
A beneficiary who doesn’t want their inherited share can execute a qualified disclaimer, an irrevocable written refusal to accept the assets. The disclaimer must reach the IRA custodian within nine months of the account owner’s death, and the disclaiming person cannot have already accepted any benefits from the account.5Office of the Law Revision Counsel. 26 USC 2518 – Disclaimers
When a per stirpes beneficiary disclaims, they’re treated as though they died before the account owner. Their share then flows down to their own children under the per stirpes framework, or if they have no children, it redistributes among the other surviving branches. This can be a useful tax tool. A beneficiary in a high tax bracket might disclaim so the funds pass to children in lower brackets who can spread the 10-year withdrawal window more efficiently. The decision is permanent, so it demands careful analysis before signing anything.