HSA Beneficiary
The person who inherits your HSA when you die, with tax treatment depending on whether it's your spouse.
What is HSA Beneficiary?
An HSA beneficiary is the person you designate to receive your HSA funds when you die. The tax treatment depends entirely on who inherits the account.
If your spouse is the beneficiary, they become the new HSA owner. The account continues to function as an HSA with all the tax benefits intact. They can contribute (if HSA-eligible), invest, and use funds for qualified expenses tax-free.
If anyone other than your spouse inherits (child, sibling, etc.), the HSA is closed. The beneficiary receives the fair market value as taxable income in the year of death. There's no 20% penalty, but they can't keep it as an ongoing HSA.
Frequently Asked Questions
What happens to my HSA when I die?
It depends on your beneficiary. A spouse inherits it as their own HSA. Non-spouse beneficiaries receive the balance as taxable income.
How do I name an HSA beneficiary?
Complete a beneficiary designation form with your HSA custodian. Update it after major life events like marriage, divorce, or having children.
Can I name my estate as beneficiary?
Yes, but it's not ideal. The HSA becomes taxable income to your estate. Naming individuals directly is usually better for tax purposes.
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