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dylatess, Attorney
Category: Legal
Satisfied Customers: 5156
Experience:  37 plus years representing clients with their legal issues
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Is a retirement account like TSP (thrift savings plan) part

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Is a retirement account like TSP (thrift savings plan) part of an probate estate if there is no will? Can this account be used to pay some of the medical bills? And how are the tax consequences if the account is used to pay mortgage and medical bills?

Hello and thank you for your question. For over 34 years I have answered questions just like yours. And I look forward to assisting you.

A TSP is an asset of the Estate. Likewise, if there is no will, and a probate is filed, the TSP must be listed. Further, moneys from this acount can be used to pay bills such as a mortgage or medical bills. As for tax consequences, any tax consequences are as a result of the total value of the Estate and not the TSP alone. And if the total value of the Estate does not exceed 5 million, there are no federal taxes owing. But, if the estate has to be probated, there will be probate/attorney fees.

Customer: replied 4 years ago.

If bills are being paid out of the tsp account will the final tax bill of the decedent be hit with a large tax percentage because all the money in the tsp account are taxable. The estate is small, but if any amount in the tsp is left over can the retirement status of the account be preserved?

The retirement status of the TSP cannot be preserved. That is becuase the money was to be used by the retiree during his lifetime and withdrawn at a time when he would have been in a lower tax bracket. However, upon his passing, this asset is now part of the overal Estate and loses its tax preferential and will be taxed as an aggregate in the total amount of the Estate.
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