What Happens to HSA When You Die?

When an individual with a Health Savings Account (HSA) passes away, the HSA's funds and assets are handled differently depending on the account's beneficiary designation.

If there is a named beneficiary on the HSA account:

• The funds in the HSA will be transferred directly to the named beneficiary.
• The beneficiary will have three options:
• Roll over the HSA funds into their own HSA if they are the surviving spouse.
• Use the funds for qualified medical expenses tax-free.
• Receive the funds as taxable income.
• If there is no named beneficiary on the HSA account:
• The HSA funds become part of the deceased individual's estate.
• The funds may be subject to probate and estate taxes.
• If the estate establishes a designated beneficiary, the funds can be transferred accordingly.

It is essential to review and update beneficiary designations regularly to ensure that the HSA funds are distributed according to your wishes.




When you pass away, what becomes of your Health Savings Account (HSA) really boils down to the beneficiary you designated. If you have named a beneficiary, the process is relatively straightforward.

Upon your passing, the funds within your HSA will be transferred to the named beneficiary seamlessly.

• For a surviving spouse, there are three excellent options:
• They can roll over the HSA funds into their own account, continuing the tax advantages.
• They can take out funds for qualified medical expenses without facing taxes.
• Alternatively, they can withdraw the funds, which would count as taxable income.

If you haven’t designated a beneficiary, however, the situation changes considerably.

• The HSA funds then become part of your estate.
• This may lead to them being tied up in probate and facing potentially hefty estate taxes.
• If your estate eventually names a beneficiary, the funds can be transferred appropriately.

To prevent confusion and ensure your wishes are honored, it’s recommended to review and update your beneficiary designations regularly.