You asked some great questions. Here are the answers.
Back in June we sent you an email describing things you should know about TSP death benefits: that your TSP account remains yours even if you die before retiring; that you can designate beneficiaries for your TSP account; and that it’s important to check your beneficiary designations whenever you have a major life change.
We asked you for any questions or other feedback, and we went through each and every one of your responses. Here are answers to some of the most common questions.
What happens to my TSP if I die AFTER retiring?
The beneficiary process is the same whether you’re retired or not. Whatever money is left in your account when you die will go to the beneficiaries you designate. If you do not designate beneficiaries, it will be distributed according to the statutory order of precedence, starting with your spouse if you have one.
Why do I need to have someone witness my beneficiary designations? And how does that work if I’m designating beneficiaries online?
The witness requirement is designed to verify that YOU are the person making the designations and not someone else.
When you designate beneficiaries online, you'll be asked to provide an email address for a witness. This should be someone you know who isn’t one of your beneficiaries.
Once you submit your beneficiary designations, a form with that information is automatically sent to your witness at the email address you provided. After they sign electronically to confirm they’ve seen your designations and signature, the form is sent to us. The witness confirmation is also supported by the unique data tied to your electronic signature.
Can I designate a minor as a beneficiary? What about someone who’s not a US citizen?
Yes, you can designate a minor as a beneficiary. If they’re still a minor when you die, they’ll need a parent or guardian to provide a signature for certain paperwork.
And yes, a noncitizen can be a beneficiary. If your noncitizen beneficiary doesn’t have a Social Security number, they’ll need to contact the IRS to get a taxpayer identification number to accept their distribution from your TSP account.
Can my estate (or a charity, educational institution, etc.) be my beneficiary? How do I set that up?
Yes, your estate (or a charity, educational institution, or other organization) can be your beneficiary. Log in to My Account on tsp.gov. On your home page, select “Manage Beneficiaries” to get to your Beneficiary Summary. Select “Add Beneficiary.” When you start an entry, you’ll see a dropdown menu giving you a choice of person, trust, estate, or other organization. We’ll need a mailing address for each beneficiary.
You can designate multiple beneficiaries (your limit is 20) and divide your account among them by percentages, or you can assign all beneficiaries an equal share of your account.
You can change your designations at any time.
Can I have contingent (secondary) beneficiaries in case my primary beneficiary and I die at the same time?
Yes. When you’re looking at your Beneficiary Summary in My Account, you’ll see a table where you can mark each beneficiary as “primary” or “contingent” (secondary). If none of your primary beneficiaries are living at the time of your death, your TSP account will be distributed to your contingent beneficiaries. But if there are multiple primary beneficiaries and only one is deceased, that beneficiary’s share will be distributed proportionally among the surviving primary beneficiaries. Distributions won’t go to the contingent beneficiaries unless ALL primary beneficiaries are deceased.
After you’ve made your designations they’ll be visible in your Beneficiary Summary, which you can access from your home page by selecting Manage Beneficiaries again. First you’ll see a table listing your primary beneficiaries. Immediately below that will be a second table listing your contingent beneficiaries, if you have designated any. Your beneficiaries are also listed on your annual participant statement.
You can change whether a beneficiary is primary or contingent at any time.
Does the entire amount in my TSP go to my beneficiaries, or just my participant contributions?
The entire amount is yours to give to your beneficiaries.
Do my beneficiaries have to pay tax on the money they get from my TSP?
Yes, they’ll pay tax on any traditional (pre-tax) money from your account. If you have a Roth TSP balance that’s less than five years old, they will also pay tax on the earnings in your Roth balance but not for your Roth contributions. For uniformed services accounts, they will not pay tax on any tax-exempt contributions you made while serving in a combat zone.
We will withhold 20% of the taxable portion of a distribution for federal tax, but this amount does not cover state income tax, and it may not be enough to cover federal income tax. Once we notify your beneficiaries of their distribution amount, it’s a good idea for them to consult a tax professional to estimate their tax liability (how much they’ll be obligated to pay) before requesting the distribution.
If they want, we can withhold more than 20%. This additional withholding goes directly to the IRS and counts toward their tax payment. If the amount withheld ends up being more than what’s owed, the excess will be refunded to the beneficiary when they file their taxes.
Alternatively, non-spouse beneficiaries can defer taxes by rolling their distribution over to an “inherited” IRA, which is not part of the TSP. (Spouse beneficiaries can keep their money in the TSP if they choose.)
How will my beneficiaries be notified after I die?
We use the U.S. Postal Service to notify beneficiaries that they can expect a distribution from your TSP account. We don’t call or send email. If mail comes back undelivered, we will contact the person who reported your death to us and ask if they can help locate your beneficiaries. If there are several beneficiaries and one can’t be located, no distributions will be issued until the matter is resolved. That’s why it’s important to keep beneficiary contact information up to date.
You sent us a lot of other questions about beneficiaries, such as what they need to do when you die and how long it takes to get their distributions.
You can find out more about beneficiary distributions on our website.
We also have a webinar about death benefits to help you remember the important points.
And you can always contact us with your questions. We like hearing from you!
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