Federal employees often have retirement and survivor benefits that do not work the same way as ordinary bank accounts or property. A will alone may not control who receives those benefits. Working with a Florida estate planning lawyer can help federal employees make sure their estate documents, beneficiary choices and retirement elections work together.
What does FERS include?
The Federal Employees Retirement System, or FERS, has three main parts: the Basic Benefit Plan, Social Security and the Thrift Savings Plan, commonly called the TSP. Each part has its own rules. That means a federal employee should not assume that instructions in a will automatically control every retirement benefit.
The FERS Basic Benefit Plan can provide retirement income during an employee’s lifetime. It may also provide benefits to certain survivors after the employee dies. The exact benefit depends on factors such as whether the employee died before or after retirement, how much creditable service the employee had and whether a qualifying spouse or other survivor exists.
How do FERS survivor benefits affect an estate plan?
A married federal employee generally makes a survivor annuity election when retiring. Under FERS, the maximum spouse survivor benefit is 50% of the retiree’s unreduced annuity. Choosing that benefit generally reduces the retiree’s annuity by 10%. A partial survivor benefit is 25% of the unreduced annuity and generally reduces the retiree’s annuity by 5%. A married retiree normally needs the spouse’s consent to choose less than the full survivor annuity.
These choices can affect how much income a surviving spouse will have after the retiree dies. They should be considered alongside life insurance, savings and other assets that may support the spouse. A federal employee who divorces or remarries should also review earlier elections because a former spouse may have rights under a qualifying court order.
Why is the TSP beneficiary designation so important?
The TSP is a retirement savings account, but its death benefits do not simply pass under a will. The TSP pays death benefits according to the beneficiary designation on file. If there is no valid designation, the account is distributed under a federal order of precedence.
This can produce an unexpected result when an estate plan has been updated but the TSP designation has not. TSP guidance states that a will, prenuptial agreement or property settlement agreement does not override the beneficiary designation or the federal order of precedence. A person who divorces and forgets to change a TSP beneficiary could therefore leave the account to someone who is no longer part of the intended estate plan.
A Florida estate planning lawyer can help compare the TSP designation with the will or trust. The goal is to make sure each document sends property where the employee actually wants it to go.
What should federal employees review after a life change?
Marriage, divorce, retirement and the birth or adoption of a child are all good times to review an estate plan. Federal employees may also want to review their plan after changing agencies or leaving federal service.
The review should include the will or trust, powers of attorney and beneficiary designations. It should also include any FERS survivor election already made or expected at retirement. These documents do different jobs. Reviewing them together can reduce the risk that one outdated form defeats a newer plan.
How can Estate Plan First help federal employees?
Federal benefits can create planning questions that are easy to miss when someone focuses only on a will. Estate Plan First can help federal employees in Florida coordinate their estate documents with their FERS and TSP choices.
For example, imagine a retired federal employee who remarried several years ago. Her will leaves her estate to her current husband, but her TSP still names an adult child from an earlier marriage. Her FERS survivor election also needs to be reviewed to see what income her husband may receive after her death. Updating only the will would not solve the full problem.
A Florida estate planning lawyer at Estate Plan First can review how federal benefits fit with the rest of your plan and help identify documents or designations that may need attention. To discuss your estate plan, call Estate Plan First at (904) 621-2230 or reach out online.
