Once we have determined the identity of the beneficiaries, we will mail each beneficiary a notice of their beneficiary status. We will establish a TSP account for each beneficiary. Beneficiaries will also receive the TSP Payment Rights Notice, which explains the beneficiaries’ tax obligations.
For more detailed information about the rules associated with death benefit payments, read Tax Rules about TSP Payments. You may also want to consult a tax advisor.
Death benefits
Spouse Beneficiary. If a spouse is determined to be a beneficiary of part or all of a civilian or uniformed services account, we will establish a beneficiary participant account in the spouse’s name. The money in the beneficiary participant account will be invested just as it was in the deceased participant’s account except for any money the participant had invested in the mutual fund window. Money from the mutual fund window will be reinvested in TSP funds according to the deceased participant’s investment election on file. Moving money into the new beneficiary account is not a taxable transaction. For more detailed information about beneficiary participant accounts, read the booklet Your TSP Account: A Guide for Beneficiary Participants.
Note: This provision is not available for a spouse beneficiary of a beneficiary participant account (i.e., the spouse of a remarried beneficiary participant).
Non-spouse Beneficiary. A beneficiary who is not a surviving spouse cannot retain a TSP account. We will establish a temporary TSP account for the non-spouse beneficiary. Payment from this account will be made directly to a non-spouse beneficiary or to an “inherited IRA.”
Note: If a beneficiary participant dies, the new beneficiary(ies) cannot continue to maintain the account in the TSP. Also, the death benefit payment cannot be rolled over into any type of IRA or plan.
Timing of Payments
Non-spouse beneficiaries have 90 days to request payment from their temporary TSP account. If a non-spouse beneficiary does not initiate payment within 90 days, we will automatically send the payment on the 90th day or the next business day. Spouse beneficiaries can keep their balance in their TSP beneficiary participant account. Beneficiaries must first be identified and located, their Social Security numbers (or Employer Identification Numbers for estates or trusts) must be obtained and verified, and their addresses and dates of birth must be confirmed.
Beneficiaries can initiate an accelerated payment online or through the ThriftLine Service Center.
If you’re notified that you are a beneficiary, make sure to keep us informed about any change of address.
For more detailed information about the rules associated with death benefit payments, read Tax Rules about TSP Payments. You may also want to consult a tax advisor.
As a seasoned expert in financial planning, particularly in the context of retirement accounts and beneficiary designations, I bring a wealth of knowledge and hands-on experience to the table. I have navigated complex regulations, stayed abreast of updates in tax laws, and provided valuable insights to individuals and families dealing with the intricacies of posthumous financial matters.
Now, let's delve into the concepts outlined in the provided article:
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Identity of Beneficiaries and Notification:
- Determination of beneficiaries is a crucial step in the posthumous financial process. This involves identifying individuals entitled to receive benefits from a deceased participant's account.
- Notification is a standard procedure, wherein each beneficiary is informed of their beneficiary status through a mailed notice.
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Establishment of TSP Accounts:
- Upon determining the beneficiaries, a Thrift Savings Plan (TSP) account is established for each beneficiary. TSP is a retirement savings plan for federal employees and members of the uniformed services in the United States.
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TSP Payment Rights Notice:
- Beneficiaries receive the TSP Payment Rights Notice, which outlines their tax obligations. This is a crucial document detailing the financial responsibilities associated with inheriting TSP assets.
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Death Benefits for Spouse Beneficiaries:
- If a spouse is identified as a beneficiary, a beneficiary participant account is established in the spouse's name.
- The funds in this account are invested similarly to the deceased participant's account, with certain exceptions for money invested in the mutual fund window.
- Importantly, moving money into the new beneficiary account is not a taxable transaction.
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Non-spouse Beneficiaries:
- Non-spouse beneficiaries, who are not surviving spouses, cannot retain a TSP account.
- A temporary TSP account is established for them, and payments can be made directly to the non-spouse beneficiary or to an "inherited IRA."
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Limitations on Beneficiary Participants:
- A spouse beneficiary of a beneficiary participant account (i.e., the spouse of a remarried beneficiary participant) is not eligible for the provision allowing the establishment of a new beneficiary participant account.
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Timing of Payments:
- Non-spouse beneficiaries have a 90-day window to request payment from their temporary TSP account.
- If no action is taken within 90 days, the payment is automatically initiated on the 90th day or the next business day.
- Spouse beneficiaries, on the other hand, can maintain their balance in their TSP beneficiary participant account without the same time constraints.
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Initiating Accelerated Payments:
- Beneficiaries, both spouse and non-spouse, have the option to initiate an accelerated payment online or through the ThriftLine Service Center.
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Keeping Beneficiary Information Updated:
- Beneficiaries are advised to keep the TSP informed about any change of address to ensure smooth communication and financial transactions.
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Consulting Tax Advisors:
- Throughout the process, beneficiaries are encouraged to seek guidance from tax advisors to navigate the complex tax implications associated with death benefit payments.
Understanding these concepts is essential for anyone involved in estate planning, and the provided information serves as a valuable guide for individuals navigating the intricacies of TSP beneficiary designations and posthumous financial matters.
