As a federal employee, you enjoy a three-tiered retirement plan unlike anything else offered in the retirement industry. The plan is thorough, but also complex, meaning many federal employees are not familiar with some of the more obscure rules and regulations regarding their own benefits. And they don’t always seem to be widely publicized!
Your Thrift Savings Plan offers a valuable opportunity for you to save for retirement. But there’s one thing about the TSP that many people don’t know: It will not honor statements included in your will, court orders, trust documents, or any other legal documents if you pass away. If you want your chosen beneficiaries to receive the money in your TSP, they will only do so if you filed Form TSP-3 at some point before your death.
That doesn’t mean you forfeit the money in your TSP if you die. It simply means the plan administrators follow a default order of rule when deciding who gets the money. That order is:
- Your spouse, if you have one
- Your children, if you don’t have a spouse
- Your parents, if you don’t have a spouse or children
- The appointed executor of your estate, if you have none of the above
- If you haven’t appointed an executor of your estate, then your state’s default rules of inheritance will apply as your estate passes through probate court
It’s best not to make any assumptions about the order of inheritance. You might currently be happy with the idea of your spouse inheriting the money, and decide not to file Form TSP-3. But what happens if you get divorced one day? Or what if you and your spouse pass away at the same time? The situation could get tricky for the person you intended to inherit your money. It’s better to fill out Form TSP-3 now, and designate both a primary and backup beneficiaries, than to leave everything up to chance.
For more help with Form TSP-3, or for advice on any other financial planning matters, give us a call. We specialize in helping federal employees manage their retirement benefits, and we can offer you expert advice geared specifically for your situation.
