Under what conditions can a TSP be frozen? Not many, but let’s look at Alexander’s, who called me this week with a huge “HELP! I cannot access my TSP!”
Alex’ story:
Alexander (Alex) is 63 years old, is married, with three grown kids, and plans to continue working with USDA for another 3 or 4 years. He has $327,325.96 in his TSP and needs withdrawal of some money to care for his wife Trish. Trish is also 63 and will enter a nursing care facility, with Stage 4 Dementia, likely Alzheimer’s. Alex has committed to $8900.00 per month for his wife’s care. The funds will come from savings and TSP. He does not have long-term care insurance. Outside of the home, the TSP is the only asset of value.
A call to TSP to begin a withdrawal was stopped quickly when TSP told him he needed his wife’s permission. Here is the issue: his wife is not competent and cannot give her permission. In this case, a previously prepared Power of Attorney would be used, but, they have never prepared a Power of Attorney (POA). Alex is stuck between a rock and a hard place. The Power of Attorney is an essential document all families and people must have.
Death and Taxes will always be there, and we must prepare for both. Life expectancy is basically the mid 80’s, but many now are living longer, but far too many lives shorter life spans. So, let’s talk about each important essential document, and why:
- Will:
All property is directed to a survivor, church, charity and if no WILL can be found, the person’s estate is called Intestate, meaning the courts will decide who gets what. The process can be very long and costly.
Famous estate messes:
- Marilyn Monroe estate took 40 years to settle.
- Howard Hughes estate took 34 years to settle.
- Pablo Picasso, left 45,000 works of art, now estimated to be worth a $ 1, billion, took six years to settle, at a cost of $30 Million.
- Advanced Directive:
Called a durable power of attorney for health care and a health care directive, this document tells advises medically if you do not want heroic means to save, or time limits on respirator. In other words, do you wish to remain in a vegetative state of 20 years, or let you go. Without this, you might find yourself trapped in a situation you wished and prayed never to be in.
- Healthcare Power of Attorney:
Your person designated to be responsible for your health care, when you are unable to speak for yourself.
- Durable Power of Attorney:
Allows you to choose a trusted friend or relative to help you with your health care and/or finances. Sign as POA for insurance claims.
- Trusts: *
There are many trusts. Most are highly defined as to purpose, investments, expenses, support and term. Some can be terminated, if revocable, others are cast in concrete such as Irrevocable. * A qualified retirement Plan (IRA, TSP, 401(k), may not be held by a trust. If funds held in a qualified retirement plan are to be held in a trust, the conversion will be a taxable event.
Revocable or Family Trust:
The word ‘Revocable’, means it can be changed at any time. The power of the Revocable trusts can be changed or terminated, at any time. The general purpose is to control assets, after death.
- Purposes:
- Spendthrift.
- Charitable donations.
- Wait until a beneficiary attains the majority.
Irrevocable trusts:
- Once enacted, assets are frozen and can only be accessed by trustee for the purposes intended and spelled out in the trust.
Other trusts for many purposes, guided by legal counsel.
One component of a trust is the Trustee.
The person or entity responsible for distribution, care and investing of the trust. In larger estates, usually an institution such as a Bank & Trust, for smaller trusts, usually a highly trusted and competent individual. Attorneys rarely want to be a trustee.
Now, let’s go back to our friend Alex, he will be required to apply to his County Court System. The court would appoint one or more people to act in the capacity of POA. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law. Court and attorney time will be costly far more than the legal fees to build a POA in the first place.
Finally, I caution anyone thinking of writing their own WILL and essential documents. Oh sure, you can save a penny or two online, but there are so many considerations that legal counsel can help prevent. A bad WILL may be worse than NO WILL.
