What Happens to Your TSP After You Die

People are concerned when the thought of dying hits them. The ones with a family are worried for them since they will have to maintain a sufficient balance in their financial accounts to live accordingly. But what happens to your Thrift Savings Plan (TSP) after you die? It all depends on whom you choose as a beneficiary. The beneficiary will be able to look after all your savings and money once you are gone. You need to make sure you select the right person who can manage this well. If you still haven’t decided who the beneficiary would be, look at your TSP account and decide. There might be two possibilities that can arise. What if you never assigned a beneficiary or if the beneficiary died before you? 

What are the Standard Procedures Outlined by Your TSP?

After the account holder dies, certain things need attention. In case the beneficiary has been mentioned, it becomes easy for your TSP account to be transferred under your name. Although it is better if the beneficiary is already decided, in case it is not, the TSP has made a standard procedure so that benefits are provided properly. The standard that is followed right after you die is:

  • Your spouse will get everything you own. 
  • Children might get all of it, which will be divided equally among them. In the case of step-children, they should be registered formally. In case it has never happened, they are excluded from the list. 
  • If you have living parents, they will get your money. 
  • Any executor or administrator of your estate might have it. 
  • It can be your kin as by the law. They should be a legal resident at the time of your death. 

The TSP does not allow you to make a will or wishes you want to express. They only deal according to the standard procedure or your decided beneficiary. Also, they will resolve pending court orders or any loans before they make any beneficiary payments. You can expect almost 30 to 60 days before the beneficiary has gotten the payments. 

What Can the Beneficiary do with the Payment?

The usage of money by the beneficiary depends on their status. Here are some standards that would be followed if your beneficiary has to deal with your money:

  • If your spouse is federally employed or retired, they can take the money out of the account and roll your TSP account as their own. They can also elect themselves as an inherited IRA. 
  • If your beneficiary is non-federally employed or retired, they can take the account’s ownership of the TSP account and elect themselves as an inherited IRA. They can then take the money out of the account. 
  • If your spouse has elected to take ownership of your TSP account, they will be created as the beneficiary participant for the account. Initially, the beneficiary is allocated L funds according to the appropriate age. 
  • For the ones who have no spouse, they can elect an inherited IRA or take the money out of it. The Secure Act has provided a limitation to the Stretch IRA for approximately every non-spouse beneficiary who will have to deplete their account in ten years. Moreover, a non-spousal beneficiary will take the minimum required distributions from your account in ten years. 

What Happens When a Spousal Beneficiary Dies?

When a spousal beneficiary passes away, the money left in their account cannot be passed on to another beneficiary. Neither can it be rolled into another account that is tax deferred. If they roll the money into an account of their own, they can choose a beneficiary. The money will be easily passed down without any issues from the TSP. For better understanding, the TSP has the best two books to help you understand the system. They are “Death Benefits” and “Your TSP Account: A Guide for Beneficiary Participants.” You will have access to the books on the TSP site under the “forms and resources” section.

Interesting Facts

You can add a good amount of money to your account to have more dollars at the end. If you want to withdraw your TSP account based on life expectancy, the total amount in dollars paid is equal to your required minimum distribution (RMD). Every December, your RMD is checked by the TSP to see if the payments meet the RMD. If they do not do so, they will send you a supplemental payment so that the desired amount meets the RMD.

Contact Information:
Email: [email protected]
Phone: 9568933225

Bio:
Rick Viader is a Federal Retirement Consultant that uses proven strategies to help federal employees achieve their financial goals and make sure they receive all the benefits they worked so hard to achieve.

In helping federal employees, Rick has seen the need to offer retirement plan coaching where Human Resources departments either could not or were not able to assist. For almost 14 years, Rick has specialized in using federal government benefits and retirement systems to maximize retirement incomes.

His goals are to guide federal employees to achieve their financial goals while maximizing their retirement incomes.

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