Who is the best beneficiary for an HSA?
Asked by: Abbigail Farrell | Last update: July 17, 2025Score: 4.6/5 (30 votes)
Who should be the beneficiary of my HSA account?
The bottom line
Listing a spouse as your beneficiary keeps the account open and helps maintain the tax benefits. If you name anyone else as your beneficiary, the HSA closes when you die. Failing to name a beneficiary will make the funds taxable on your final tax return.
Who benefits most from HSA?
For those who choose high-deductible health plans (HDHPs), an HSA has real advantages. It can offset your medical costs, reduce your taxes, and give you a long-term tax-advantaged savings account. An HDHP isn't the best option for everyone, but having one is the only way to get access to an HSA account.
Who is considered family for HSA?
Based on these rules, however, only family members who are classified as your spouse, or as dependents that you claimed on your most recent tax return, or that you could have claimed on your tax return, would be eligible for coverage under your HSA.
What is a potential downside of HSA?
Drawbacks of HSAs include tax penalties for nonmedical expenses before age 65, and contributions made to the HSA within six months of applying for Social Security benefits may be subject to penalties. HSAs have fewer limitations and more tax advantages than flexible spending accounts (FSAs).
The Real TRUTH About An HSA - Health Savings Account Insane Benefits
What is the best way to fund HSA?
Typically, HSA contributions can be made via payroll deductions and may include contributions from the employer. There are annual contribution limits, depending on whether the health plan covers an individual or a family. Then, you can use your HSA money at any time, preferably to pay for qualified medical expenses.
Can I use my parents' HSA after I turn 26?
However, he can be covered on his parent's high deductible health plan (HDHP) until age 26, but their HSA funds cannot be used to pay his out-of-pocket medical expenses.
Can you have two HSA accounts in one family?
Each spouse who wants to contribute to an HSA must open a separate HSA. Money cannot be transferred between the HSAs. A spouse may use withdrawals from his or her HSA for the eligible medical expenses of the other spouse, without penalty. However, money cannot be withdrawn from two HSAs to pay for the same expense.
Can my kids inherit HSA?
You may also name your children or other non-spouse individuals as a beneficiary. For someone other than a spouse the tax benefits of account ownership do not transfer. The balance of the account will be distributed to your beneficiary and becomes taxable to them in the year you pass away.
Who should not get an HSA?
HSAs might not make sense if you have some type of chronic medical condition. In that case, you're probably better served by traditional health plans. HSAs might also not be a good idea if you know you will be needing expensive medical care in the near future.
What happens to your HSA when you turn 65?
Once you turn 65, you can use the money in your HSA for anything you want. If you don't use it for qualified medical expenses, it counts as income when you file your taxes.
Can HSA be used for dental?
Yes, you can use a health savings account (HSA) or flexible spending account (FSA) for dental expenses.
Who should I add as my beneficiary?
A lot of people name a close relative—like a spouse, brother or sister, or child—as a beneficiary. You can also choose a more distant relative or a friend. If you want to designate a friend as your beneficiary, be sure to check with your insurance company or directly with your state.
What happens to HSA on death?
What happens to an HSA at death? Like an IRA account, when a person sets up an HSA, they name a beneficiary. If the beneficiary is a surviving spouse, the unused portion of the decedent's HSA passes directly to the spouse and becomes his or her HSA; there is no tax liability.
Who should contribute to an HSA?
An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions.
What is the tax loophole for HSA?
Answer: HSAs offer a rare triple tax benefit: Contributions are deductible, the money grows tax deferred and withdrawals can be tax free if there are qualifying medical expenses.
Can my wife use my HSA if she's not on my insurance?
Yes, as long as you use the funds to pay for qualified medical expenses, you can pay for any family member who is a tax dependent on your tax return.
Are employee and spouse considered family for HSA?
Short answer: No. An HSA is owned by one person. Yet, there is a way for you and your spouse to have HSAs of your own. If you and your spouse are covered under the same HDHP, you can each open your own HSA and contribute separately.
What is the adult child loophole for HSA?
Here it is: “If your adult, non-dependent child is only covered by your High Deductible Health Plan, they (or you) can also make a family contribution into THEIR HSA in addition to yours.” For 2024, that contribution limit is $8,300 (in 2025, it'll be $8,550).
Can I use HSA for gym membership?
Gym memberships. While some companies and private insurers may offer discounts on gym memberships, you generally can't use your FSA or HSA account to pay for gym or health club memberships. An exception to that rule would be if your doctor deems fitness medically necessary for your recovery or treatment.
At what age can you withdraw from HSA without penalty?
At age 65, you can take penalty-free distributions from the HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified medical expense.
What is a good HSA balance?
If you're unsure of where to start, try working with a financial advisor. What Is the Average HSA Balance By Age? The average HSA balance for a family is about $7,500 and for individuals it is about $4,300. This average jumps up to $12,000 for families who invest in HSAs.
What are the tax secrets of HSA?
Any interest or earnings on the assets in the account are federal income tax-free if used to pay for or reimburse qualified medical expenses. Amounts contributed directly to an HSA by an employer are generally not included in taxable income.
What is the best bank for an HSA account?
Top 3 HSA Providers for Spending
Carlson: Standing alone at the very top is Fidelity. That's the only provider to earn our highest rating as a spending account. They don't charge any fees, and they pay what is far and away the highest interest rate in an FDIC-insured option.