Federal Employee Estate Planning: TSP, FEGLI, and Survivor Benefits

Your will controls your bank accounts, real estate, and personal property. It does not control your TSP, your FEGLI life insurance, your FEHB coverage, or your FERS survivor annuity election. These four streams of federal benefits pass entirely outside probate — governed by beneficiary designation forms and retirement elections you may have signed years ago and forgotten. Getting them wrong is the most common and most costly estate planning mistake federal employees make.

The four federal benefit streams and how they pass

Each of these is independent. Updating your will has zero effect on them. You must manage each separately — and review them after every major life event.

TSP beneficiary designation: Form TSP-3

Your TSP account is often the single largest asset a federal employee owns — $500,000 to $1.5 million or more for employees approaching retirement. Where it goes when you die is determined by one document: Form TSP-3, Designation of Beneficiary.¹

If you have never filed a TSP-3, the TSP distributes your account according to the statutory order of precedence, regardless of what your will says:

1. Widow or widower
2. Child or children in equal shares; a deceased child's share passes to that child's children (by representation)
3. Parents equally, or the surviving parent
4. Appointed executor or administrator of your estate
5. Next of kin under the laws of the state where you resided

What TSP-3 lets you do

A filed TSP-3 overrides the statutory order entirely. You can:

• Name any individuals in any proportions (50% to spouse, 25% to each child, etc.)
• Name a trust as beneficiary (useful for minor children or complex estates — but requires careful drafting to avoid adverse tax consequences)
• Name a charity or other entity
• Name contingent beneficiaries who receive your TSP only if the primary beneficiaries predecease you

Important: A new TSP-3 completely cancels any prior TSP-3 on file. TSP-3 is a paper form — it must be signed in front of a notary or signed before a TSP officer, then mailed or delivered to the TSP Service Office. Unlike most financial accounts, TSP beneficiary updates cannot be completed entirely online.¹

What happens to TSP at death: spouse vs. non-spouse beneficiaries

The mechanics differ significantly based on who inherits:

Surviving spouse beneficiary: TSP establishes a beneficiary participant account in the spouse's name. The spouse can:

• Keep the account in TSP (retaining access to the G Fund and 0.05% expense ratios)
• Roll the account to their own IRA or employer retirement plan (tax-free rollover)
• Roll Roth TSP to a Roth IRA (which then has no lifetime RMDs, unlike a beneficiary participant account that is subject to RMDs)

Non-spouse beneficiaries (children, siblings, parents, or trusts): TSP establishes a temporary account in the non-spouse's name. They have 90 days to elect distribution or roll to an inherited IRA. If they take no action, TSP automatically distributes the full balance on day 90. An inherited IRA allows spreading distributions over the beneficiary's lifetime under IRS rules (subject to the 10-year rule for most non-spouse beneficiaries under SECURE 2.0).²

FEGLI beneficiary designation: Form SF-2823

FEGLI (Federal Employees' Group Life Insurance) is the second major benefit stream that passes outside your will. Its beneficiary designation is a completely separate document — Form SF-2823 — filed with OPM or your HR office, not with TSP.³

If no SF-2823 is on file, FEGLI follows its own statutory order of precedence:

1. Designated beneficiary (your SF-2823 supersedes everything if valid)
2. Assignee (if you have assigned your FEGLI to another person or trust)
3. Widow or widower
4. Children in equal shares
5. Parents equally, or surviving parent
6. Executor or administrator of your estate
7. Next of kin

You can change your SF-2823 at any time. A new SF-2823, if valid, cancels any prior designation. Unlike TSP-3, there is no notary requirement — the form requires two witnesses but they can be coworkers.³

Sizing your FEGLI at retirement — don't decide without running the numbers

FEGLI coverage is highest during working years when agency subsidizes 2/3 of the Basic premium. At retirement, you make a one-time, irrevocable election about how much coverage to keep and how the premium structure changes:

• Basic coverage: you choose "Full Reduction" (coverage phases to zero by age 65, cost eventually $0), "No Reduction" (keeps face value forever, premium continues), or "75% Reduction" (middle path). "No Reduction" costs the most but preserves a legacy value.
• Option B (multiple of salary): premiums jump steeply by age band in retirement — many retirees drop it at 65 when it becomes unaffordable, leaving survivors with less coverage than planned.

For most federal retirees, the key estate planning decision is whether FEGLI or the survivor annuity election (or a combination) is the right approach to protect a surviving spouse. These two instruments solve the same problem — income replacement for a spouse — with very different mechanics, costs, and tax treatments.

FERS death-in-service benefits: what your family receives if you die before retirement

If you die as an active federal employee before retiring, your family receives a package of benefits — entirely separate from anything in your will.⁴

Basic Employee Death Benefit (BEDB)

If you have at least 18 months of creditable civilian service and your spouse was married to you for at least 9 months (or is the parent of a joint child), your surviving spouse receives:

• A lump sum of $43,800.53 (effective December 1, 2025; indexed annually for COLA)⁴
• PLUS 50% of your final basic salary or high-3 average salary, whichever is higher

Death-in-service survivor annuity

If you have at least 10 years of creditable service, your surviving spouse is also eligible for an ongoing annuity equal to 50% of the FERS annuity you would have been entitled to at your date of death (computed under the standard FERS formula using actual service and high-3). This is paid monthly for the rest of the surviving spouse's life.

Eligible surviving children (unmarried, under 18, or full-time students under 22, or disabled) also receive monthly annuities paid from the Civil Service Retirement and Disability Fund.

Annual leave lump sum at death

Your accumulated and unused annual leave at the time of death is paid as a lump sum to your beneficiaries. This is determined by your TSP-3 order of precedence — it follows the same statutory order as TSP.⁴

FEHB for surviving family members

A surviving spouse or eligible child who is receiving a FERS survivor annuity (either the death-in-service annuity or the survivor annuity elected at retirement) can continue FEHB enrollment. They pay the full FEHB premium — the government no longer contributes the employer share — but they can deduct premiums directly from the annuity payment and retain access to all FEHB plans.

If no survivor annuity is being paid, the surviving family members generally cannot continue FEHB beyond a temporary period (Temporary Continuation of Coverage, or TCC, available for 18 months at 102% of premium). This is one reason the survivor annuity election at retirement is so consequential — eliminating it also eliminates the primary mechanism for keeping FEHB in retirement for a surviving spouse.

Survivor annuity election at retirement: the largest single estate planning decision

When you retire under FERS, you choose how much survivor annuity to leave a spouse: full (50%), reduced (25%), or nothing. This election is made once and is largely irrevocable. It determines:

• The monthly reduction to your own retirement annuity (roughly 10% for the full election)
• What your spouse receives monthly if you die first
• Whether your spouse can continue FEHB
• Whether your spouse qualifies for certain Medicare premium protections related to FEHB

This decision is covered in detail in our Survivor Annuity vs. Life Insurance Calculator, which lets you model the break-even and compare the survivor annuity to private life insurance as an alternative.

What your will CAN and CANNOT control

When to review your designations

Federal employees should review TSP-3 and SF-2823 after every major life event:

• Marriage — the new spouse is not automatically the TSP or FEGLI beneficiary if your TSP-3 or SF-2823 names someone else from a prior relationship
• Divorce — a prior spouse remains the beneficiary until you file a new form; divorce alone does not remove them
• Death of a named beneficiary — if your primary beneficiary predeceases you and you have no contingent beneficiary, TSP falls back to the statutory order
• Birth or adoption of a child — if you want specific allocation to a child, update your TSP-3
• Significant increase in TSP balance — consider whether your current allocation still matches your intent
• Approaching retirement — confirm all designations before the survivor annuity election makes things irrevocable

As a general rule: review TSP-3 and SF-2823 every 3–5 years even if no life event occurred. These forms are easy to forget after initial enrollment.

How a federal-benefits specialist can help

The coordination problem — aligning TSP beneficiaries, FEGLI elections, survivor annuity decisions, FEHB implications, and your existing will or trust — requires someone who understands all four systems simultaneously. Most estate attorneys understand the will; most general financial advisors understand brokerage accounts; but very few grasp the interplay of FERS survivor annuity, TSP beneficiary accounts, and FEGLI retirement elections at the same time.

A fee-only advisor specializing in federal benefits can walk through each stream, identify mismatches between your current designations and your stated intent, and model the survivor annuity election in combination with FEGLI and private insurance to determine the optimal structure for your family's income security.

Sources

1. TSP.gov — Designating Beneficiaries: Form TSP-3 instructions, statutory order of precedence, and how beneficiary participant accounts work for surviving spouses. Verified May 2026.
2. TSP.gov — Beneficiary Distributions: surviving spouse beneficiary participant account rules, non-spouse 90-day window, rollover to inherited IRA mechanics. Verified May 2026.
3. OPM — FEGLI Designation of Beneficiary: SF-2823 form requirements, order of precedence, and rules for changing designations. Verified May 2026.
4. OPM — FERS Survivors: Basic Employee Death Benefit ($43,800.53 lump-sum effective December 1, 2025), death-in-service survivor annuity eligibility (10-year service requirement), and FEHB continuation rules. Verified May 2026.

TSP beneficiary rules, FEGLI designation requirements, and FERS BEDB amounts verified against TSP.gov and OPM.gov. BEDB lump-sum amount effective December 1, 2025. Current as of May 2026.