What to Do When You Inherit an HSA?

When you inherit an HSA (Health Savings Account), there are specific steps you should take to ensure a smooth transition and make the most of the account benefits. Here’s a guide on what to do:

1. Understand the HSA Basics

It’s essential to grasp the fundamental concepts of an HSA, such as its tax advantages, eligible expenses, and contribution limits.

2. Determine Your Relationship to the Account Holder

Your actions may differ based on whether you are the spouse or non-spouse beneficiary of the HSA owner.

3. Contact the HSA Provider

Notify the HSA provider about the account holder's passing and inquire about the necessary documentation and procedures.

4. Decide on Distribution Options

Depending on your relationship to the account holder, you may choose to transfer the HSA funds to your own HSA, liquidate the account, or continue using it for qualified medical expenses.

5. Be Aware of Tax Implications

Understand any tax implications associated with inheriting an HSA, including potential income taxes on non-spouse beneficiaries.

6. Keep Records

Maintain accurate records of all transactions related to the inherited HSA for tax reporting and tracking purposes.

By following these steps and staying informed, you can effectively manage an inherited HSA and leverage its benefits to support your health and financial well-being.

When you inherit an HSA (Health Savings Account), understanding how to manage it effectively can provide significant benefits, especially regarding healthcare costs. Start by ensuring you have a grasp of the fundamental concepts of an HSA, such as tax advantages and eligible expenses, which can make a positive impact on your financial planning.