Personal Finance (Not Investing) • [Another] Per stirpes and Vanguard question

(As an aside, and this may cause #threaddrift, but why can't per stirpes be applied to a class containing a single individual? Is there some ambiguity or paradox that could result? I can't imagine one but I'm sure people could say I don't have a very good imagination, which might be true.)

I think that question lies at the heart of the issue.

Per stirpes or per branch or per root is applied to a class. It cannot be applied to an individual. Why? Because there is only one individual and can be only one individual. If a class is comprised of only one person, it's still a class and the modifier can be applied to the class even though it is only one individual. But if you name one individual to receive a specific bequest, that one individual gets it. Per stirpes would have no actual meaning. You'd have to build in a definitions section wherein you state that "if client adds per stirpes to their beneficiary designation, we will interpret that to mean.... John Smith and if John Smith predeceases, then to John Smith's descendants per stirpes."

Or you just rely on the good graces of the reviewer and hope they'll do what you want. Which may occur more than 50% of the time. Who knows. Or maybe you don't care enough, in which case, that'd be fine too. Go ahead and roll the dice.

I can see how it gets quite complicated in some scenarios. Our family is quite simple (I think, anyway): no second marriages, no step kids, no adopted kids, no common law marriages, no kids born out of wedlock, no weirdness or drama anywhere.

I'm not sure if anyone will or even can opine on this as it is my specific example, but the scenario I care most about and am least confident about is this:

Grandpa has a traditional IRA at Vanguard. Grandpa has three kids: Kid 1, Kid 2, Kid 3 and lists his beneficiaries as "Kid 1 per stirpes", "Kid 2 per stirpes", and "Kid 3 per stirpes" with each getting 1/3 (i.e. equally). Kid 3 has three kids: Grandkid3.1, Grandkid 3.2, and Grandkid 3.3.

Grandpa passes away. Kid 3 properly disclaims 75% of his 1/3 beneficiary share of Grandpa's traditional IRA at Vanguard. Where do people think that 75% of his 1/3 beneficiary share would go?

Oh, and another question @Lee_WSP: Would changing it from "John Smith, per stirpes" to "the class comprising John Smith, per stirpes" fix the issue you raise?

Statistics: Posted by marcopolo — Wed Jun 19, 2024 2:33 am — Replies 60 — Views 2104