Can You Put Money in an HSA from an Inheritance?

Check eligibility on the go — browse 7,000+ HSA-eligible products in the free app.

Inheritance HSA eligibility: can you contribute?

One common question people have about Health Savings Accounts (HSAs) is whether they can put money into an HSA from an inheritance. The short answer is yes, you can put money from an inheritance into an HSA, as long as you meet the eligibility requirements for an HSA.

Many people wonder about the possibilities of funding their Health Savings Accounts (HSAs) with money received through an inheritance. The good news is that you can do this, provided you meet specific eligibility criteria that govern HSAs.

How HSAs work and their tax benefits

HSAs are individual accounts that allow you to save money tax-free for medical expenses. They are typically paired with high-deductible health plans (HDHPs) and offer several tax advantages. Here's how it works:

• Contributions to an HSA are tax-deductible
• Money in the HSA grows tax-free
• Withdrawals for qualified medical expenses are also tax-free

Steps to fund an HSA with inheritance

Now, let's look at how you can fund your HSA with money from an inheritance:

• Ensure you are eligible for an HSA - You must have an HDHP and cannot be enrolled in Medicare.
• Check the contribution limits - In 2021, the maximum contribution for an individual is $3,600 and $7,200 for a family.
• Transfer the inheritance funds to your HSA - You can do this by depositing the money directly into your HSA account.
• Keep track of your contributions - Be mindful of the contribution limits to avoid any penalties.
• Use the HSA funds for qualified medical expenses - You can use the funds in your HSA for various medical expenses, including doctor visits, prescriptions, and more.

Remember, using HSA funds for non-medical expenses before age 65 may incur taxes and penalties. However, after age 65, you can use HSA funds for non-medical expenses penalty-free (though you will pay income tax).

Final guidance and professional advice

So, if you receive an inheritance and want to put that money into an HSA, it is entirely possible, provided you meet the HSA eligibility criteria. Consult with a financial advisor or tax professional for personalized advice on your specific situation.