Where Will Your TSP Balance Go When You Die?

You work hard for years and save money in your TSP (Thrift Savings Plan) for your retirement from federal service.  If for some reason you die before you retire, or at some point after you retire and there is still money in your TSP account – do you know where it will go?  When you die you may have a spouse or children that you want to leave your money to but it is important to have specified a beneficiary beforehand so that there is no confusion over what to do with your hard earned TSP account.

Many individuals mistakenly think that their will, prenuptial agreement, or other court order will inform individuals where their TSP should be distributed but this is not the case.  The TSP does not use any of these documents to determine where to distribute your death benefit payments.  For this reason, it is important to file your TSP-3 form as soon as possible.  When you fill out your TSP-3 form you can designate one or more individuals, a trust, a corporation, your estate, or another legal entity to be the beneficiary of your account.  Further, you can designate who will be a contingent beneficiary should one of your primary beneficiaries die before you do.  It should also be noted that if your life circumstances change for any reason (divorce, separation, remarriage, birth of a child, adoption of a child, etc.) and you want to change who will receive your TSP account balance, you must file a new TSP-3 form or your original designation will be who receives your death benefits, even if you are separated or divorced.  If your spouse is also a federal employee and you die, your spouse can merge your TSP account with their own if so desired.  Additionally, if your spouse is not a federal employee and you die, they can choose to leave the money in your TSP account until needed.  And, if your beneficiary is not your spouse, they can opt to have the money transferred to an IRA account.

If die and you do not have a TSP-3 form filled out, your TSP account will be distributed according to the federal benefits standard order of precedence, as follows:

1. To the beneficiary (or beneficiaries) designated by the participant on a properly completed and filed Form TSP-3, Designation of Beneficiary.

2. If there is no designated beneficiary, to the widow or widower;

3. If none, to the child or children and descendants of deceased children by representation;

4. If none, to the surviving parent or parents;

5. If none, to the duly appointed executor or administrator of the estate;

6. If none, to the next of kin who is entitled under the laws of the participant’s domicile on the date of the participant’s death.

If you are uncertain whether or not you have filled out a TSP-3 form or want to ensure that you TSP benefits go to the right person, speak to an experienced federal retirement planner who can assist you.