August is National Make a Will Month, making it a good time to review your estate plan. But before you put your will back in the drawer, take a few minutes to review your TSP beneficiary designation as well.
Many federal employees don’t realize that these are two separate parts of an estate plan. While your will determines how most of your assets are distributed, your Thrift Savings Plan (TSP) is paid according to the beneficiary designation on file, not according to your will.
That distinction can have major consequences if your beneficiary information is outdated.
Key Takeaways
- Your TSP beneficiary designation generally takes precedence over your will.
- FEGLI and many other retirement accounts also rely on beneficiary designations.
- If you don’t have a valid beneficiary designation on file, the TSP follows the federal order of precedence established by law.
- National Make a Will Month is a good reminder to review both your will and your beneficiary elections.
Why Your TSP Beneficiary Designation Matters
Many people assume that once they update their will, all of their assets will automatically follow those instructions. That’s not how the TSP works.
If you’ve named a beneficiary for your TSP, those funds are generally paid according to that designation. If your circumstances have changed because of marriage, divorce, the birth of a child, or the death of a beneficiary, your will typically won’t override an outdated TSP beneficiary election.
The same principle applies to FEGLI and many private-sector retirement accounts and life insurance policies.
Even more surprising, if you don’t have a valid TSP beneficiary designation on file, the plan doesn’t automatically look to your will. Instead, it follows the federal order of precedence established by law, paying benefits first to a surviving spouse, then children, followed by parents, the executor of your estate, and finally your next of kin.
A Will Still Matters
None of this makes a will any less important. A properly prepared will allows you to name an executor, direct how probate assets should be distributed, identify guardians for minor children, and help simplify the administration of your estate.
Without one, state law generally determines how probate assets are distributed, which may not reflect your wishes. The important point is that your will and your beneficiary designations should complement each other. One doesn’t replace the other.
Life Changes. Make Sure Your TSP Beneficiary Designation Keeps Up.
Beneficiary designations are often completed when someone first joins federal service and then forgotten. Years later, life may look very different.
Marriage, divorce, remarriage, children, grandchildren, and the loss of loved ones can all affect who you want to receive your retirement benefits.
Unfortunately, beneficiary mistakes are often discovered only after someone dies, when they can no longer be corrected.
Taking a few minutes to review your beneficiary elections today can help prevent unnecessary confusion, delays, and family disputes later.
Three Things Worth Reviewing This Month
National Make a Will Month is a great excuse to review more than just your will.
Take a few minutes to check:
- Your TSP beneficiary designation
- Your FEGLI beneficiary designation
- Your will, durable power of attorney, and advance healthcare directive
Even if everything is already current, you’ll have the peace of mind of knowing your documents still reflect your wishes.
What Federal Employees Should Remember
Estate planning isn’t just about creating a will. It’s about making sure every document that controls your assets points in the same direction.
This National Make a Will Month, don’t stop after reviewing your will. Make sure your TSP beneficiary designation and other beneficiary elections still reflect the people you intend to protect.
If it’s been several years since you’ve reviewed your retirement and estate planning documents, now is an excellent time to make sure they’re all working together.
Frequently Asked Questions
Does my TSP follow my will?
Generally, no. Your TSP is typically distributed according to the beneficiary designation on file. If no valid designation exists, the TSP follows the federal order of precedence established by law.
Can I update my TSP beneficiary designation?
Yes. You can update your beneficiary designation through your TSP account. It’s a good idea to review it after major life events such as marriage, divorce, or the birth of a child.
Does FEGLI follow my will?
Generally, no. FEGLI benefits are also typically paid according to the beneficiary designation on file.
How often should I review my beneficiary designations?
It’s wise to review your beneficiary elections whenever you experience a major life event and at least every few years to make sure they still reflect your wishes.
