Thrift savings plans are assets requiring a different attention to detail than other financial products. This is true because TSP Beneficiary Forms are designed and managed by our federal government.
Families contribute to these types of assets for obvious reasons. On the other hand, long term care issues, grandchildren, litigation, carelessness, and divorce are events that must be considered in various tools outside a beneficiary form.
As a result, estate plans that include thrift savings retirement benefits should consider the following:
- The Federal Retirement Thrift Investment Board (FRTI) manages these benefits;
- FRTI claims, they work flawlessly;
- FRTI states they spend participant money wisely; and
- TSP Beneficiary Forms unfortunately use a block lettering system.
As great as these assets might be for Federal Employees and military families, I am fearful of unintended consequences.
For example, voiding a beneficiary form because a name could not fit into their block system. Or, placing assets in a trust that isn’t prepared for a TSP asset. In other words, a beneficiary form that is incorrectly completed, might inadvertently get taxed at a higher rate or offered to a nursing care facility. Other times, families incorrectly expose an asset to a divorced spouse or a divorced adult child that had once married into the family.
I like to see our military and civil service families weigh the following:
- Has each Thrift Savings Plan or Beneficiary Form been updated?
- Does the accumulation of wealth make a Bypass or Credit Shelter Trust more significant?
- How might the SECURE Act impact each TSP Plan?
- Could an accumulation or conduit trust help streamline a specific goal or outcome?
- Does a durable power of attorney document address an opportunity to fix or change beneficiary forms in the future?
Unfortunately, occupational hazards make these issues important for the young and old. Therefore, if you have a Thrift Savings Plan and need personal attention or advisement, or need support with certain estate planning tools, please consider the above mentioned issues as an introduction to Thrift Saving Plans.
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Estate Attorney Jasper Berg