An insured named her four children as beneficiaries in equal shares to her $60,000 life insurance policy. Her eldest child has two children and dies prior to the insured. The other three children do not have children of their own. If the insured designated the beneficiaries per capita, how will the proceeds be distributed?
The three surviving children will each receive $20,000.
In a per capita distribution, the proceeds from the life insurance policy will be divided equally among the living beneficiaries. Since one of the four children has passed away, the total amount will be distributed among the three surviving children, resulting in each receiving $20,000.
This choice correctly reflects the per capita distribution method, where the total proceeds of $60,000 are divided equally among the three surviving children, yielding $20,000 each.
This option incorrectly assumes that the deceased child's share would revert to the estate instead of being redistributed among the surviving beneficiaries. In a per capita arrangement, the deceased's share is not lost but rather divided among those still living.
While this choice suggests an equal distribution, it inaccurately calculates the amount. With a total of $60,000 and three beneficiaries, each child should receive $20,000, not $15,000.
This option inaccurately introduces the grandchildren as beneficiaries, which is not applicable in a per capita distribution where only the surviving children are considered. The children share the total amount equally, without any allocation to the grandchildren.
In the case of the insured's life insurance policy, the per capita designation means the proceeds are distributed equally among the surviving children. With one child deceased, the remaining three beneficiaries will split the $60,000, each receiving $20,000. This reinforces the principle that in per capita distributions, shares are recalculated among the surviving beneficiaries, ensuring equitable allocation of the policy benefits.
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