One of the largest assets outside of a primary residence for many federal employees is their Thrift Savings Plan (TSP) retirement account. This account defers income tax so that the money in the account can grow tax free. At death, the assets in these accounts do not pass according to the TSP owner’s will. They pass as a non-probate asset directly to the designated beneficiary.
If the surviving spouse is the beneficiary then the assets in the TSP can be rolled over into the spouse’s retirement account. If the beneficiary is someone other than the spouse, they cannot be rolled over into the beneficiary’s IRA, but they can be transferred into an inherited IRA. The funds can then be withdrawn (and taxed) over a period of time that coincides with the beneficiary’s life expectancy.
A trust may also be the beneficiary of a TSP. This can provide both tax advantages as well as some creditor protection privileges. For more information on options for your Thrift Savings Plan, please contact Stouffer Legal at 443-470-3599 in the Greater Baltimore area.
