Q&A: What Happens to a Health Savings Account After Death?
January 28, 2025
Understand different ways health savings accounts are inheritable after the passing of the account holder.
Understand different ways health savings accounts are inheritable after the passing of the account holder.
For the first time this year, we are offering our employees the option of enrolling in a health plan that qualifies them to open a health savings account (HSA). We’re anticipating resistance and want to make sure our employees are fully aware of the advantages of doing so. One thing I’ve seen mentioned is that unlike Flexible Spending Accounts (FSAs), HSAs are inheritable. Can you explain how that works?
Anyone who has an HSA should designate a beneficiary, the same as they would with any other bank account. The form for doing so should be included with the HSA enrollment form provided by the bank or other vendor.
The ownership and tax treatment of an HSA upon the account holder’s death depends on who (or what) the beneficiary is.
HSA holders should regularly check to make sure their beneficiary designations are up to date. Many HSA administrators allow this to be completed online. It may also be advisable to consult a tax advisor regarding the tax ramifications of beneficiary selection, especially for significant HSA balances. Note that this is a very generalized discussion, and different factual scenarios may result in different results. It’s always best to discuss these types of issues with a tax or financial advisor when they arise