Estate Beneficiary of Thrift Savings Plan
I have a client who is age 51.
Her sister, employed by US Government passed away in 2015 at age 55. Sister had named my client as sole beneficiary of her Government Thrift Savings Plan (TSP).
Upon request for rollover of the TSP, the sister’s employer (US Govt) stated they cannot find the beneficiary designation form and questioned whether one was ever submitted.
My client has a copy of a signed beneficiary designation form which she also submitted to the US Govt with her request to process the rollover. However, US Govt. said is not acceptable as proof that it was submitted by her sister prior to her death.
Government said they will cut a check payable to the estate within 90 days.
Question – Does my client have any recourse to compel US Govt to comply with the signed beneficiary designation form?
Question – If not, I assume that she must liquidate the account by end of fifth year?
Question – Can they still take advantage of five year rule if the check is being made payable to the estate or should client ask the Govt to make check payable some other way. US Govt says they will withholding 10% from the amount of the check.
Sorry for the long question(s) but thankful as always for any help provided by other forum members.
-Howard
Permalink Submitted by Alan - IRA critic on Tue, 2015-06-30 16:44
If the death benefit amount is sufficient and if your client or her attorney feel there is adequate evidence that the TSP accepted the beneficiary designation, they should pursue their case. Most large plans send out annual statements to plan owners showing the current beneficiary on the plan, so that statement would be key evidence in such a case. Otherwise, the TSP has some unique restrictions for non spouse beneficiaries, and the plan document probably indicates that an estate beneficiary will receive a lump sum. There is no possibility of an inherited IRA transfer to use the 5 year rule if the TSP beneficiary is not an individual or qualified trust. Finally, it is not clear why they are withholding anything from the check because the distribution is not an eligible rollover distribution.
Permalink Submitted by Howard Hook on Tue, 2015-06-30 18:07
Thanks Alan as always.Amount is material (approx $550,000). Not sure if they have any documentation other than signed copy of the designation of beneficiary form since I believe the designation form was submitted recently as she was sick so she retired prompting a new designation form.So if they have no remedy then the entire $550,000 will be subject to income tax in 2015? If so is that at Estate marginal income tax rates or the marginal rate of the heirs under the Will (My client )Thanks