What does "per stirpes" refer to in beneficiary designations?

The term "per stirpes" in beneficiary designations refers to a method of distributing benefits to beneficiaries in a way that honors the lineage of the deceased. Specifically, it means that if a beneficiary has passed away before the insured, that beneficiary's share of the benefits will not simply vanish; instead, it will be passed down to that beneficiary's descendants. This ensures that if a designated beneficiary dies, their children or heirs will receive the portion that would have gone to them, maintaining generational wealth transfer.

Understanding this term is critical in estate planning, as it establishes how benefits will be handled in the event that a primary beneficiary predeceases the insured. This method contrasts with other distribution methods where the share may be redirected to the remaining living beneficiaries or divided evenly regardless of familial ties.

Thus, the correct answer captures the essence of how "per stirpes" benefits operate, ensuring that a deceased beneficiary's heirs are included in the distribution.