TSP Death Benefits: Beneficiary Designations, Form TSP-3, and the Order of Precedence

Your Will Has No Authority Over the TSP

This is the single most consequential fact about TSP death benefits, and most federal employees don't know it: the TSP cannot honor wills, trusts, or prenuptial agreements. Period.

If you die with a valid Form TSP-3 (Designation of Beneficiary) on file, your TSP account is distributed according to that form. If you don't have a TSP-3 on file, the account follows the statutory order of precedence — a fixed hierarchy set by federal law.

It doesn't matter what your will says. It doesn't matter what your trust documents specify. The TSP's distribution rules exist in their own legal universe.

Form TSP-3: How to Designate Beneficiaries

Form TSP-3 is the only way to direct where your TSP account goes after your death. You can designate anyone — a spouse, children, siblings, a trust, a charity — and assign percentage shares.

The requirements for a valid TSP-3:

• Signed by the participant (you).
• Witnessed by two individuals who are at least 21 years old and are not named as beneficiaries on the form.
• No notarization required. Unlike spousal consent for withdrawals, the TSP-3 only needs witness signatures.
• Any new TSP-3 automatically supersedes all previous designations. You don't need to "cancel" an old one — just file a new form.

You can submit Form TSP-3 through the My Account portal on TSP.gov. The digital submission process has replaced the older paper-filing method for most participants.

The Statutory Order of Precedence

If you die without a valid TSP-3 on file — or if your TSP-3 is invalid because it lacks proper witness signatures — your account is distributed according to this fixed hierarchy:

1. Spouse — your legal spouse receives the entire account.
2. Children (including adopted children) — split equally among them if there's no surviving spouse.
3. Parents — split equally if both are alive.
4. Executor or administrator of your estate — the account passes through probate.
5. Next of kin — determined under the laws of the state where you lived.

The order is rigid. If you're in step 1 (surviving spouse), the account goes entirely to them regardless of whether you have children from a prior marriage, a longtime partner, or any other circumstance.

This is why the TSP-3 matters so much for anyone whose wishes don't perfectly align with this hierarchy — which includes most people in blended families, unmarried partnerships, or situations where you want to split assets between a spouse and children from a previous marriage.

The Ex-Spouse Problem

Divorce doesn't automatically remove an ex-spouse from your TSP-3. If you filed a TSP-3 naming your first spouse as beneficiary, got divorced, remarried, and never filed a new TSP-3, your first spouse receives your entire TSP account when you die.

Your current spouse's only recourse would be to challenge the TSP-3 in federal court — an expensive, uncertain process. The TSP record keeper is legally required to follow the most recent valid TSP-3 on file at the date of death.

The fix is simple: file a new TSP-3 after any major life event — marriage, divorce, birth of a child, death of a designated beneficiary. Treat it the same way you'd treat updating your FEGLI beneficiary (Form SF-2823).

How Beneficiaries Receive the Money

Beneficiaries have three options for receiving TSP death benefit distributions:

1. Lump-sum payment. The beneficiary receives the entire share in a single distribution. Taxed as ordinary income in the year received (for traditional TSP balances).

2. Direct transfer to an inherited IRA. Spousal beneficiaries can roll the TSP death benefit into their own IRA (traditional or Roth, matching the source). Non-spouse beneficiaries can transfer it to an inherited IRA, where it's subject to the 10-year distribution rule under SECURE 2.0 (the entire inherited balance must be distributed within 10 years of the account holder's death).

3. TSP beneficiary participant account. Surviving spouses can maintain the inherited TSP balance in a special beneficiary participant account within the TSP itself, preserving access to the TSP's low-cost funds. Non-spouse beneficiaries don't have this option.

Death benefit distributions to beneficiaries are never subject to the 10% early withdrawal penalty, regardless of the beneficiary's age.

Coordinating TSP-3 With Your Other Federal Beneficiary Forms

The TSP-3 is one of several beneficiary designation forms in the federal benefits system, and they operate independently. Updating one doesn't update the others:

• Form TSP-3 — TSP account
• Form SF-2823 — FEGLI (life insurance)
• SF-1152 — unpaid compensation at death
• OPM designation — FERS/CSRS survivor annuity

Each form has its own rules, its own filing process, and its own version of the order of precedence if no designation is on file. A comprehensive beneficiary review means checking all of them — not just one.

Keeping Your Designations Current

The TSP Withdrawal & Drawdown Strategy Guide includes a pre-separation beneficiary audit checklist — walking through Form TSP-3, the FEGLI designation, and your FERS survivor annuity election so every federal benefit points where you intend.

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