End-of-life planning can ensure a thoughtful and organized transition, providing peace of mind for you and your loved ones during a challenging time. After reading this article, you'll understand how to select beneficiaries for your HSA and the tax implications of your selections.
Spouse as beneficiary
If you've chosen your spouse as your beneficiary, your HSA will transfer directly to them. There are no tax implications; they can continue using the HSA to spend, save, and invest. This means its triple-tax advantage will also remain.
If your spouse has their own HSA, they may also transfer the funds to your HSA.
Non-spouse as beneficiary
If you have beneficiaries who are not your spouse, the HSA will close on the account holder's death date. The funds are liquidated, distributed, and taxed as income to the beneficiary. The beneficiaries can use the HSA funds to pay for the remaining Qualified Medical Expenses of the account holder for up to 12 months after their death.
Estate or no chosen beneficiaries
If you have chosen your estate or have not chosen a beneficiary, your HSA will be distributed to your estate and taxed as income on your final income tax return.
How to add beneficiaries
To select beneficiaries for your HSA, follow these steps.
Select Profile.
Select Beneficiaries.
Select Add Beneficiary.
Primary and contingent beneficiaries
You have the option of selecting both primary and contingent beneficiaries.
If an account holder passes way, the HSA funds will be distributed to the primary beneficiary.
If the primary beneficiary cannot receive the funds, the HSA funds will be distributed to the contingent beneficiaries.
More than four beneficiaries
If you want to select more than four beneficiaries, you have the option of designating a trust as a beneficiary. To learn more about this process, please contact your benefit administrator.