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 each choice.
Primary and contingent beneficiaries
You have the option of selecting both primary and contingent beneficiaries.
If you pass away, your HSA funds go to your primary beneficiary.
If your primary beneficiary can't receive the funds, they go to your contingent beneficiaries instead.
Spouse as beneficiary
If you've named your spouse as your beneficiary, your HSA becomes their HSA when you pass away. There are no tax implications, and they can keep using it to spend, save, and invest, with its triple-tax advantage intact.
If your spouse has their own separate HSA, they can choose to move your funds into that account instead.
Non-spouse as beneficiary
If your beneficiaries aren't your spouse, your HSA is treated as closed for tax purposes as of your date of death.The funds are liquidated and taxed as income to your beneficiary. Your beneficiaries can still use the funds to pay for your remaining qualified medical expenses for up to 12 months after your death.
Estate or no chosen beneficiaries
If you've named your estate, or haven't chosen a beneficiary, your HSA becomes part of your estate and is 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.
More than ten beneficiaries
If you want to name more than ten beneficiaries, you can designate a trust as your beneficiary instead.