A number of federal employees and retirees live in and around the Reston area. If you’re one of them and you’re preparing to put your estate plan in place, this is a good time to consider what will happen to your Thrift Savings Plan (TSP) after you’re gone.
This means making sure that your designated beneficiaries for your TSP as well as investment accounts and anything that allows for beneficiary designees are current – and remain current.
If there is no surviving beneficiary for your TSP when you pass away, the proceeds will be distributed according to TSP’s “order of precedence” according to the law. These beneficiaries may not be the ones you’d have chosen.
What is the order of precedence for TSPs?
If no beneficiaries are designated or still living, the funds in the TSP are distributed as follows:
- To the surviving spouse, if there is one
- To the children, if there’s no surviving spouse
- To the parents, if there’s no spouse or children
If there are no surviving family members in any of these categories, the proceeds go to the executor as long as they were appointed by the deceased (in other words, not one appointed by the probate court). If no executor was appointed, then the following next of kin under Virginia law.
How TSP proceeds are distributed
If your surviving spouse is your TSP beneficiary, their funds will be deposited into another TSP in their name. Non-spousal beneficiaries will still receive the proceeds you’ve designated for them to have, but they won’t be placed in a TSP.
Some important reminders about beneficiary designations
While you can list your beneficiary designations in your will, this doesn’t take the place of listing them directly on the account(s). If you do list them both places but there’s a discrepancy, what’s on the account overrides what’s in the estate plan.
It’s a lot to think about. Having experienced estate planning guidance here in Reston, Herndon or elsewhere in Northern Virginia can help you ensure that your planning for your TSP and other assets reflects your wishes.