Are You Married? Are You Sure?

What will happen to your TSP money when you die? Some federal employees fail to tell Uncle Sam what to do with your money. Your failure to act may impact your survivors.

Are you a person who plans your life carefully or are you a free spirit who likes to just take life as it comes along?

No doubt, there are plenty of the latter working for Uncle Sam. But, if you are not a careful planner, here is something to think about.

If you are a federal employee and ended up living with someone but never got around to getting married (just taking life as it comes along!), what happens to your federal employee benefits?

Perhaps you never gave it any thought. Perhaps you don’t really care. In either case, it may mean your valuable federal employee benefits could be affected. And, if you haven’t given it enough thought, you may end up inadvertently hurting someone you love–or giving money to someone you would have preferred not to enrich after your demise.

If you are a federal employee, and have entered into a "common law" marriage, your federal employee benefits could be affected.

The issue of common law marriage periodically pops up on cases. For example, in Bindings That Tie, some readers were surprised to learn that a common law marriage may have an impact on federal annuity benefits. Was the happy couple really married? Or was this an unhappy couple just sharing the same space for a period of time? As noted in that article, "It’s a lot easier to get married this way than it is to break up a common law marriage." The issue was important because the federal employee who died had a very valuable annuity at stake and the MSPB and a federal court were not certain how to handle the legal entanglements that he left behind. Perhaps he loved his wife and would have wanted her to benefit from his years of federal service. Perhaps he hated her and would have been very unhappy at the thought of her benefitting from his federal service.

In either case, it was too late for him to have much impact on the outcome.

And here is another wrinkle. A common law marriage may impact the disposition of your Thrift Savings Plan money as well.

The Federal Retirement Thrift Investment Board points out that a common law marriage involves more than some people think it does.

Contrary to popular belief, a common law marriage is not created when two people simply live together for a certain number of years. In order to have a valid common law marriage, a couple generally must do all of the following: Live together for a significant period of time, hold themselves out as a married couple, and intend to be married. When a common law marriage exists, the couple receives the same legal treatment given to formally married couples, including the requirement that they go through a legal divorce to end the marriage.

Here is why this is important to a federal employee who has a Thrift Savings Plan. If you have not designated a beneficiary, your TSP money has to go somewhere. The TSP organization plans to modify its regulations to make this job a little easier.

The Federal Retirement Thrift Investment Board proposes to amend its regulations to clarify the proof needed to establish a common law marriage. If a participant dies without having withdrawn money from his TSP account and without having designated a beneficiary, the account will be paid to the surviving spouse–if there is one.

State laws vary on the issue of common law marriage. But, one item that all federal employees presumably do, regardless of the state of residence, is file a federal income tax return. (Federal employees who don’t get around to filing a federal tax return may have a different set of problems.) So, to make the decision process faster, the decision on what happens to your TSP money may be determined by what you told the Internal Revenue Service on your tax form.

Did you file as a single person or married? Presumably, the information you give to the IRS is reliable and your TSP money may go to the person with whom you are living if you told the IRS you are married. On the other hand, if you told the IRS you were single, that is likely to be taken as a reliable indication you do not consider yourself to be married and your "spouse" will probably not get your TSP money unless you designated that person as your beneficiary.

So, for those free spirits who are getting older, who have a TSP fund that is growing, and may be retired or getting close to it, perhaps it is time to let go of the free spirit attitude (at least for a short time) and think about those who may still be around after you have died.

If you wish to comment on the proposed change to the TSP regulations, you have until February 13, 2006 to do so. Comments may be sent to Elizabeth S. Woodruff, General Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 20005. The agency’s fax number is (202) 942-1676.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47