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Death Benefits


> Can an estate request that the TSP directly rollover (transfer) a TSP death benefit payment to an inherited IRA?
> Can a trust that is designated as a TSP beneficiary transfer a TSP death benefit payment to an inherited IRA?
 
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1. Can an estate request that the TSP directly rollover (transfer) a TSP death benefit payment to an inherited IRA?Return to Top of this Page

No.  The Internal Revenue Code and Treasury regulations do not allow plans, like the TSP, to make a direct rollover (direct transfer) to an inherited IRA on behalf of an estate.  Internal Revenue Service Notice 2007-7, Q & A -11, only permits rollovers (transfers) to an inherited IRA when the nonspouse beneficiary is a designated beneficiary within the meaning of Treas. Reg. § 1.401(a)(9)-4.  Treas. Reg. § 1.401(a)(9)-4, Q & A -3, does not allow an estate to be a designated beneficiary for the purpose of making a rollover to an inherited IRA.

2. Can a trust that is designated as a TSP beneficiary transfer a TSP death benefit payment to an inherited IRA?Return to Top of this Page

The Internal Revenue Service regulations allow plans, like the TSP, to make a direct rollover (direct transfer) to an inherited IRA on behalf of the trust when the trust is the named beneficiary of a participant.  However, the trust must meet the following requirements:

  1. It is valid under state law or would be valid but for the fact that there is no trust corpus;
  2. It is irrevocable, or it will, by its terms, become irrevocable on the participant's death;
  3. Its beneficiaries are identifiable under the trust instrument; and
  4. A copy of the trust instrument or a certified list of beneficiaries is provided to the plan.  1.401(a)(9)-4, Q & A -5. 

The TSP must determine if the trust meets the above requirements.  If it does, we may make a direct rollover (transfer) to an inherited IRA on behalf of a trust when the trust is named as the participant's beneficiary (or one of his/her beneficiaries).  The inherited IRA must have the trust identified as the beneficiary.  The beneficiaries of the trust are treated as having been designated as beneficiaries of the participant for purposes of determining the required minimum distribution period under I.R.C. section 401(a)(9).  See Q & A -16, IRS Notice 2007-7.

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