Handling HSAs After Death or Divorce
Many health savings accounts have grown quite large and merit careful consideration in divorce or inheritance planning.
Remember when IRAs were a new idea? Then they became mainstream, and then we began to commonly see them as assets to be dealt with in death and divorce. And so it is with health savings accounts (HSAs). They may still seem like a new idea, but HSAs have now been with us for 13 years, and some of the balances have become quite large.
Health Savings Account Basics
HSAs are tax-exempt custodial accounts. Tax-deductible contributions can be made up to specified annual amounts, there are no income restrictions for contributing, and they must be used in conjunction with a qualified high-deductible health insurance plan. You can continue to withdraw from the HSA plan to cover qualified medical expenses even after you are no longer eligible to contribute, usually due to a change in health insurance plan or hitting age 65. Medicare recipients can no longer contribute because they are covered by Medicare Part A and cannot qualify for a high-deductible plan. HSA dollars can be used to pay for Part B premiums but not Medicare supplement policies.