After years of hard work and saving for retirement, we all hope to live long enough to enjoy the fruits of our labor. But none of us can predict the future, so it’s always best to prepare for every possibility.
Did you know that the Thrift Savings Plan will not honor a will, trust document, court order, or any other estate-planning device when you die? Your intended beneficiaries will only receive the money in your TSP if you have filled out and filed Form TSP-3.
If you do not utilize Form TSP-3, the Thrift Savings Plan will follow a default order or rule when deciding how to distribute the money in your account. The money will first go to your spouse, if you have one, and then to your children if you do not have a spouse. If you do not have a surviving spouse or children, the money will go to your parents, and then to the appointed executor of your estate if you have one. If all of these options are exhausted, the laws in your state will determine next of kin for inheritance purposes.
If you want to choose your own beneficiaries, you must file Form TSP-3. You are allowed to choose one or more people to receive the funds in your account, or you can designate the money to a trust or your estate.
If you choose, you can designate primary beneficiary to receive the funds in your account. Then you can choose contingency beneficiaries who will receive the money in the event your primary beneficiary passes away before, or at the same time as you. This is a particularly helpful strategy for those who choose a primary beneficiary who is about the same age (such as a spouse). Remember, as you both grow older you might forget to regularly review beneficiaries.
There is also the chance that your spouse, or other primary beneficiary, is mentally or physically incapacitated by the time you pass away. Choosing backup beneficiaries is the best way to ensure that your money will end up in the right hands. Consult with your financial planner or estate planning attorney to be sure that you have correctly filed Form TSP-3.
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