The HSA is then handled in considered one of two methods, relying upon whether or not the beneficiary is the account holder’s surviving partner.
A partner “routinely and immediately” turns into the HSA account holder, Levine defined. Importantly, such a switch of possession shouldn’t be taxable, and future distributions from the HSA will likely be topic to revenue tax solely to the extent that they weren’t used for certified medical bills.
As soon as the account is transferred to their identify, the surviving partner can designate a brand new beneficiary to obtain any quantities remaining within the HSA upon their very own demise. Different choices embody rolling some or the entire HSA’s account steadiness into one other HSA they already personal.
All Different Inheritors
Levine and Slott then mentioned what occurs to HSA funds inherited by anybody apart from a surviving partner.
Usually, the HSA then ceases to be an HSA. In flip, an quantity equal to the truthful market worth of the account property as of the date of the account holder’s demise is included within the beneficiary’s gross revenue.
Notably, a non-spouse beneficiary could cut back that quantity by any funds comprised of the HSA for certified medical bills incurred by the deceased account holder earlier than demise. However, as Levine and Slott emphasised, such funds should be made inside one 12 months after the unique proprietor’s demise.
As well as, the unique proprietor can identify their very own property because the HSA beneficiary. In such a case, the remaining quantity is included within the decedent’s gross revenue for the 12 months by which the demise occurred.
Pictured: Jeff Levine and Ed Slott
