Beneficiary Designations for Military Families: TSP, SGLI, IRAs, and More!
Estate planning has a reputation for being the financial task everyone intends to do and very few actually get around to. The reasons are familiar:
It feels like it will take a lot of time.
The subject matter is uncomfortable.
The assumption is that it costs more than it is worth to sort out.
For most military members, there is really only one moment that forces the conversation: pre-deployment workups. JAG offices fill up, powers of attorney get signed, and wills get drafted or dusted off. Then the deployment ends, life moves on, and those documents sit untouched until the next workup rolls around.
There are two key problems with this mentality. The first is that life changes far more often than a deployment cycle. Marriages, divorces, new children, promotions, separations, and retirements all happen between deployments, and very few of those changes trigger a follow-up review of the financial accounts that matter most.
The second is that estate planning is not just about wills, trusts, advanced healthcare directives, or powers of attorney. There’s also beneficiary designations and perhaps even, some plain language instructions and conversations with your loved ones.
This is the first article in a two-part series on military estate planning basics. Part two will cover the core documents every military family should have in place and some of those important conversations. This article focuses on something that can be addressed outside of any legal process, on any timeline, without waiting for a deployment to force the issue: beneficiary designations.
Why Beneficiary Designations Matter More Than Most People Realize
A beneficiary designation is a legally binding instruction tied directly to a financial account. It determines who receives that account when the owner dies and it bypasses a will entirely. Unlike a will, which goes through probate and can be contested or delayed, a beneficiary designation takes effect immediately, paying out directly to whoever is named on the form. The designation on file at the time of death controls the outcome, regardless of what any other document says.
That also means an outdated designation can send money in the wrong direction. A divorce, a remarriage, the birth of a child, or the death of a previously named beneficiary can all create situations where an account passes to someone the owner never intended to receive it. It happens more often than most people expect, and it is entirely preventable.
TSP Beneficiary Designations
The Thrift Savings Plan operates under federal law, and its rules are strict. The TSP cannot honor a will, a prenuptial agreement, or a property settlement when determining who receives a participant's account after death.
Participants can name up to 20 total primary and contingent beneficiaries. One important note: since the TSP transitioned to a new record-keeping system in 2022, contingent beneficiaries are no longer linked to specific primary beneficiaries. Contingents only receive a payout if all primary beneficiaries have predeceased the participant, which matches how most financial institutions handle it but may differ from how older designations were set up.
If no designation is on file, the TSP pays out according to a federal statutory order: spouse first, then children equally, then parents, then the estate, then next of kin. For many participants that order works fine, but blended families or anyone with specific intentions should have a designation on file.
The beneficiary type also matters. A surviving spouse becomes the owner of a Beneficiary Participant Account and can maintain the TSP account long-term. Non-spouse beneficiaries receive a temporary account and have 90 days to request a distribution or roll the funds into an inherited IRA. If they miss that window, the TSP distributes the balance automatically, and that payment generally cannot be rolled over, triggering ordinary income taxes in the year received.
TSP beneficiary designations can be updated at any time by logging in to My Account at tsp.gov.
SGLI Beneficiary Designations
Servicemembers' Group Life Insurance provides up to $500,000 of coverage and is automatic for most eligible servicemembers, with premiums deducted from base pay. Like the TSP, SGLI is governed by federal law. State family law and community property rules generally do not apply. If a servicemember designates a spouse and later divorces without updating the form, the ex-spouse may still receive the proceeds.
Maybe even more likely, if a servicemember named their parents initially as a single person, and then married and neglected to update their SGLI beneficiary, the servicemember’s parents will still receive the SGLI payout.
SGLI beneficiary elections are managed through the Servicemembers' Online Enrollment System (SOES) in each branch's personnel portal. Married servicemembers who name someone other than their spouse are required by law to notify the spouse, though consent is not required.
Minor children under age 18 cannot directly receive SGLI proceeds. Naming a minor directly will likely require a court-appointed guardian to manage the funds until the child reaches the age of majority, which is costly and slow. Naming the other parent as primary beneficiary, using a trust, or setting up a UTMA designation are often better alternatives.
SGLI coverage ends 120 days after separation. Veterans who convert to Veterans' Group Life Insurance (VGLI) need to file a new beneficiary designation, as the SGLI form does not carry over automatically.
IRA Beneficiary Designations
IRA beneficiary rules changed significantly with the SECURE Act in 2019 and are worth understanding, especially for anyone who has not reviewed designations in the past few years.
Before 2020, most non-spouse beneficiaries who inherited an IRA could stretch distributions over their own lifetime. The SECURE Act eliminated that for most beneficiaries. Under current rules, most non-spouse beneficiaries who inherit an IRA from someone who died on or after January 1, 2020, must withdraw the entire balance within 10 years of the original owner's death.
IRS final regulations issued in July 2024 added a further requirement: if the original owner had already begun taking required minimum distributions (RMDs) before death, non-spouse beneficiaries must also take annual RMDs during years one through nine of that 10-year window. Missing those distributions carries a 25% excise tax, reduced to 10% if corrected within two years. The IRS waived penalties for missed inherited IRA RMDs from 2021 through 2024, but that relief ended. 2025 is the first year the full rules apply with no exceptions.
Surviving spouses have considerably more flexibility. A surviving spouse can roll an inherited IRA into their own account and delay distributions until their own required beginning date, or elect to be treated as the deceased spouse for RMD purposes under rules introduced in SECURE Act 2.0. Inherited Roth IRAs are also subject to the 10-year rule, but because qualified distributions are tax-free, the impact is far less significant.
The bottom line for IRA beneficiary planning: who is named, and whether the account is traditional or Roth, has real tax consequences for heirs.
Bank Account Beneficiary Designations
Checking accounts, savings accounts, money market accounts, and CDs are the accounts people use every day, and often the last ones anyone thinks about when it comes to beneficiaries. Most banks offer a Payable on Death (POD) designation for deposit accounts, which works the same way as a beneficiary designation on a retirement account. The funds pass directly to whoever is named, outside of probate, without delays or court involvement.
The catch is that a POD designation is not automatic. It has to be set up separately for each account, and many account holders have simply never done it. Without one, a bank account becomes part of the probate estate, potentially tying up funds for months while the estate is administered. For a surviving family member who needs liquid access quickly to cover immediate expenses, that delay is a real hardship.
Adding a POD beneficiary is straightforward: contact the bank, complete a beneficiary designation form, and provide the beneficiary's name and identifying information. The beneficiary has no rights to the account while the account holder is alive. Upon death, they present a death certificate and valid identification, and the funds are typically released within days.
One limitation worth noting: POD designations do not provide access to funds during incapacity. That is a separate issue addressed through a power of attorney. For beneficiaries who are minors or may not be equipped to manage a large lump sum, a trust arrangement may also be worth considering.
Life Events That Should Trigger a Review
Marriage or remarriage
Divorce or legal separation
Birth or adoption of a child
Death of a named beneficiary
Separation or retirement from military service
Opening any new financial account
Significant change in family dynamics or financial goals
A practical approach: review all beneficiary designations at least once per year alongside an annual financial review, rather than waiting for the next deployment to force the conversation.
Final Thoughts
For most military members, estate planning happens in one concentrated window before a deployment and then gets set aside until the next one. That pattern makes sense given the demands of military life, but it leaves a gap, because life keeps changing in between.
Beneficiary designations on TSP accounts, SGLI coverage, IRAs, and everyday bank accounts can be updated at any time, directly through each account. Keeping them current costs nothing but a few minutes. For servicemembers and veterans who have spent years building savings and providing for their families, that small effort ensures everything they have built reaches the right people, on the right timeline, and with as little financial friction as possible.
Disclaimer: Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, investment advisory services, or legal advice regarding estate matters. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Read the full disclosure.