If you die before your TSP account is completely withdrawn, the balance in your account will be distributed according to your most recent TSP-3, Designation of Beneficiary, if you completed one. If you did not file a TSP-3, your account will be distributed according to the order of precedence required by law.
If you are covered by the Federal Employees Retirement System and you die before you separate from service, your beneficiaries are entitled to your entire account balance, whether or not you have met the vesting requirement for your agency automatic (1%) contributions.
If you have a TSP loan outstanding when you die, your account cannot be distributed until the outstanding amount has been declared a taxable distribution. Your estate or survivors cannot repay the loan. The loan will be declared as taxable income to your estate, not to your beneficiaries.
If the beneficiary of your TSP account is your spouse, the withdrawal options are to leave the money in a spouse beneficiary TSP account, receive a single lump sum payment, or transfer all or a portion of the amount to a traditional or Roth Individual Retirement Account, eligible employer plan, or the spouse’s TSP account (no taxes withheld).
If the beneficiary of your TSP account is not your spouse, the beneficiary can transfer the amount to an inherited Individual Retirement Account. Any amount not transferred is subject to mandatory 10 percent Federal income tax withholding.