Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2011 Page 23
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31lump-sum distribution eligible for the 10-year tax option if
Part V
the plan participant was born before January 2, 1936. See
Lump-Sum Distributions in Publication 575 for details.
Rules for Survivors
Also, see Important Tax Information About Thrift Savings
of Federal Retirees
Plan Death Benefit Payments, which is available from the
TSP.
This part of the publication is for survivors of federal retir-
ees. It explains how to treat amounts you receive because
Beneficiary participant account. A beneficary partici-
of the retiree’s death. If you are the survivor of a federal
pant account will be established for a spouse beneficiary.
employee, see
Part
IV.
The money in the account is not subject to Federal income
tax until it is withdrawn. For more information on benefi-
Decedent’s retirement benefits. Retirement benefits ac-
ciary participant accounts, see Death Benefits, Information
crued and payable to a CSRS or FERS retiree before
for Beneficiaries, available from the TSP.
death, but paid to you as a survivor, are taxable in the
same manner and to the same extent these benefits would
Both of the above TSP documents are available
have been taxable had the retiree lived to receive them.
on the TSP website at Select
“Forms & Publications.”
CSRS or FERS Survivor Annuity
If you receive a payment from a uniformed serv-
CSRS or FERS annuity payments you receive as the
!
ices TSP account that includes contributions from
survivor of a federal retiree are fully or partly taxable under
combat zone pay, see
Uniformed services Thrift
CAUTION
either the General Rule or the Simplified Method.
Savings Plan (TSP)
accounts, under Reminders near the
beginning of this publication.
Cost recovered. If the retiree reported the annuity under
the Three-Year Rule and recovered all of the cost tax free,
Federal Estate Tax
your survivor annuity payments are fully taxable. This is
also true if the retiree had an annuity starting date after
Form 706, United States Estate (and Generation-Skipping
1986, reported the annuity under the General Rule or the
Simplified Method, and had fully recovered the cost tax
Transfer) Tax Return, must be filed for the estate of citizen
free.
or resident alien of the United States who died in 2011 if
the gross estate is more than $5,000,000. Included in this
General Rule. If the retiree was reporting the annuity
$5,000,000 are any adjusted taxable gifts made by the
under the General Rule, figure the tax-free part of the
decedent after 1976 and the specific exemption allowed for
annuity using the same exclusion percentage that the
gifts by the decedent after September 8, 1976, and before
retiree used. Apply the exclusion percentage to the amount
1977.
specified as your survivor annuity at the retiree’s annuity
starting date. Do not apply the exclusion percentage to any
The gross estate generally includes the value of all
cost-of-living increases made after that date. Those in-
property beneficially owned by the decedent at the time of
creases are fully taxable. For more information about the
death. Examples of property included in the gross estate
General Rule, get Publication 939.
are salary or annuity payments that had accrued to an
employee or retiree, but which were not paid before death,
Simplified Method. If the retiree was reporting the annu-
and the balance in the decedent’s TSP account.
ity under the Simplified Method, your tax-free monthly
amount is the same as the retiree’s monthly exclusion
The gross estate also usually includes the value of the
(Worksheet A, line 4). This amount remains fixed even if
death and survivor benefits payable under the CSRS or the
the monthly payment is increased or decreased. A
FERS. If the federal employee died leaving no one eligible
cost-of-living increase in your survivor annuity payments
to receive a survivor annuity, the lump sum (representing
does not change the amount you can exclude from gross
the employee’s contribution to the retirement system plus
income.
any accrued interest) payable to the estate or other benefi-
ciary is included in the employee’s gross estate.
Exclusion limit. If the retiree’s annuity starting date was
before 1987, you can exclude the tax-free amount from all
the annuity payments you receive. This includes any pay-
Marital deduction. The estate tax marital deduction is a
ments received after you recover the cost tax free.
deduction from the gross estate of the value of property
If the retiree’s annuity starting date is after 1986, you
that is included in the gross estate but that passes, or has
can exclude the tax-free amount only until you recover the
passed, to the surviving spouse. Generally, there is no limit
cost tax free. The annuity payments you receive after you
on the amount of the marital deduction. Community prop-
recover the annuity cost tax free are fully taxable.
erty passing to the surviving spouse qualifies for the mari-
Deduction of unrecovered cost. If the annuity starting
tal deduction.
date is after July 1, 1986, and the survivor annuitant’s
death occurs before all the cost is recovered tax free, the
More information. For more information, get Publication
unrecovered cost can be claimed as a miscellaneous item-
950, Introduction to Estate and Gift Taxes, and Publication
ized deduction (not subject to the 2%-of-adjusted-
559, Survivors, Executors, and Administrators.
gross-income limit) for the annuitant’s last tax year.
Publication 721 (2011)
Page 23
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