An important part of estate planning doesn’t necessarily involve any estate planning documents. It involves designating beneficiaries for your retirement accounts as well as things like investment accounts and life insurance policies. You do that directly on the account or policy with the company that holds it.
If you’re a current or retired federal employee with a Thrift Savings Plan (TSP), it’s important to designate one or more beneficiaries to inherit it when you’re gone. If you don’t, the TSP will be divided according to the law among your closest family members – who may not be the ones you intended to receive the proceeds.
What happens if you don’t designate beneficiaries?
Here’s how a TSP is distributed if there are no beneficiary designations:
- Your widow/widower, if you are legally married when you pass away
- Your child(ren), if there is no surviving spouse
- Any surviving parents, if you have no surviving spouse or children
- The executor of your estate, but only if you named one prior to your death
- Next of kin as determined by state law
Remember that beneficiary designations on the account/policy itself override any beneficiaries listed for these assets in your estate plan if there’s a discrepancy.
What if your beneficiaries aren’t employed by the federal government?
It depends on whom the beneficiary is. For example, if your surviving spouse is a beneficiary, they can have the funds placed in a TSP in their name. Other beneficiaries don’t have that option. However, they still get any funds you’ve designated for them (or that they receive because of their place in the line of succession listed above).
By creating an estate plan and taking charge of designating beneficiaries for your TSP and other accounts, you have a greater say in who gets your assets. For example, if you don’t have any surviving family, you may opt to designate your living trust as a beneficiary. That will send your funds to the trust to be distributed along with your other trust assets to charitable organizations or other beneficiaries as you specify. By having experienced estate planning guidance, you can make the choices that are right for you and those you care about.
