Beneficiary Designations: What You Should Know
PART 1 – WHAT EVERY MEMBER SHOULD KNOW
Contributors: Joy N. Burditt, CISP, ALMI, ACS – VP Operations; Peggy von Kaufman, CISP, ALMI, ACS – VP Operations; Brooke Gullion, CISP, FLMI, ACS, ARA – AVP Operations; Zachary Trevino, FLMI, ACS, ARA – AVP Operations
Whether you’re securing your family’s future through a life insurance certificate or planning for retirement with an annuity, understanding how beneficiary designations work is essential. These designations are more than just paperwork – they are a vital part of your legacy planning.
Beneficiary designations determine who receives the proceeds of your certificate upon your passing—and how those proceeds are distributed. We are required to pay according to the last beneficiary designation that was submitted, approved, and confirmed, within the legal requirements of various state and federal statutes.
In this first installment of our three-part series, we’ll break down the basics—what a beneficiary is, how designations work, and why they matter.
What Is a Beneficiary?
A beneficiary is the person or entity you name to receive the proceeds of your life insurance or annuity certificate upon your death. Insurance carriers, such as Catholic Life Insurance, require clear beneficiary designations to ensure your wishes are honored.
There are three levels of beneficiaries:
- Primary Beneficiary: Receives the proceeds upon your death.
- Contingent Beneficiary: Receives the proceeds upon your death only if all primary beneficiaries have predeceased you.
- Tertiary Beneficiary: Receives the proceeds upon your death only if both all primary and all contingent beneficiaries have predeceased you.
Only the Primary Beneficiary level above is required. You may name multiple beneficiaries at each level, assigning specific percentages to each. The total for each level must equal 100%.
Note: The method of distribution (Per Capita vs Per Stirpes, discussed later) determines how proceeds are handled if a beneficiary predeceases you.
Multiple Beneficiaries: How It Works
If you name more than one beneficiary at a given level, the death benefit is divided according to the percentages you assign. For example:
- Two primary beneficiaries could receive 60% and 40%, respectively.
- Percentage must be precise (e.g., 33.33%) and total 100%.
- Fractions (e.g., 1/3) are not acceptable.
Per Capita vs. Per Stirpes: What’s the Difference?
Term | Definition | Impact |
Per Capita | “By the Head” | If a named beneficiary dies before you, their share is redistributed among surviving beneficiaries. Their descendants do not inherit. This is the default method unless otherwise specified. |
Per Stirpes | “By the Branch” | If a named beneficiary dies before you, their share passes to their legal descendants (children, grandchildren, etc.). Must be explicitly stated for each applicable beneficiary. Blanket designations like “All Per Stirpes” are no longer accepted. |
These terms define how benefits are distributed if a beneficiary dies before you.
Catholic Life Insurance’s default designation is Per Capita. A Per Stirpes designation must be specified on an approved Change of Owner or Beneficiary Form.
Note: If a beneficiary survives the covered individual but passes away within contractual timeframes (usually within 15-30 days; varies by contract), they are treated as predeceased. If they survive beyond that, their Estate receives their portion.
Real-world examples:
Per Capita Example
Jack Doe names four children as primary beneficiaries, each with 25%. One child, John, predeceases Jack. The remaining three children receive 33.33%, 33.33%, and 33.34%.
Per Stirpes Example
Same setup, but John’s designation is “Per Stirpes.” John’s 25% passes to his only child, Jackson. The other three children retain their original 25% shares.
Best Practices for Designating Beneficiaries
- Review regularly: Life changes—marriage, divorce, births, deaths, minors reaching adulthood—can affect your designations.
- Be specific: Use full legal names, relationships, and percentages.
- Consult your agent and/or the Membership Service Center: There may be unique forms and requirements.
- Seek legal advice: Especially if you live in a community property state or have a complex estate.
Keep It Current: Annual Reviews Recommended
To ensure your beneficiary designations and coverage remain relevant, we recommend meeting with your agent annually or bi-annually. Life changes quickly, and your insurance should reflect your current needs and relationships.
Final Thought
Your beneficiary designation is a powerful tool in protecting your loved ones and honoring your legacy. Take the time to review it, understand it, and keep it up to date—your future self (and your heirs) will thank you.
