TSP Death Benefits – PLEASE Check Your Beneficiaries

No one wants to think about planning for death – but sadly this is a reality that we must face and the better organized we are for those we leave behind, the better off they will be. No one wants to leave their spouse, kids, or any beneficiary with a mess. So today let’s start with the TSP and making sure we have our beneficiaries in order.

Any beneficiaries you named when you initially onboarded do not carry over to your TSP – you have to notify TSP separately when designating a beneficiary – you can log into your TSP account to do this. Even if you think you did this it can never hurt to double check. Here is why this is crucial:

Any agreement in place such as a will, prenup, etc. will NOT override the order of precedence or the beneficiary designation

If there are no forms on file then upon your death funds are distributed according to what is called “the order of precedence.” That means if no beneficiaries are specified your TSP balance will be distributed in the following order:

1. Spouse
2. If no spouse to your child or children equally – if any child was deceased what would have been their share goes (equally) to their descendants
3. If no spouse or children, to your parents equally or to the surviving parent
4. If none of the above apply it will go to the executor or administrator of your estate
5. Finally, if none of these exist it will all go to your next of kin who is considered entitled to your estate according to the laws of the state you lived in when you died

Even if you read this and think you would be ok with the current order of things, it is still best to assign beneficiaries – you never know what may change, if you will forget, and also leaving it all blank just delays the whole process.

SO now, what happens once these beneficiaries are designated?

Important – you cannot cancel or ask to revert to the order of precedence once you have named beneficiaries. The only thing you can do is designate a new beneficiary. To change this you will need to submit a form for a new designation.

New-ish (2022) Rule on Beneficiaries:

First, note that you can have primary and contingent beneficiaries – and you can name up to a total of 20. Primaries are first in line to receive your death benefit – but as with anything, always good to have a back up plan so name some contingents in case all of your primaries died before you.

What changed in recent years is that now, ALL primaries must be deceased in order for any contingents to get any money from your TSP.

Stay tuned for more next week…

This is a lot to absorb and we are breaking it into smaller bites. Next week we’ll continue this discussion and talk about what beneficiaries need to know and what they need to do. In the meantime, here is a great resource on what we have discussed thus far, we’ll add this to our ever growing tool chest as well: TSP: Designating Beneficiaries