What Happens to my HSA When I Die?

It’s a topic many of us don’t like to talk – or even think – about, but if you don’t designate a beneficiary for your HSA (Health Savings Account) the ramifications may not be in line with your wishes.

What happens to your HSA upon your death?

When you open your Sterling account, you will be asked to designate one or more beneficiaries to whom distribution of your HSA will be made upon your death. You may revoke this beneficiary designation at any time and designate different individuals as beneficiaries. Any beneficiary designation you make must be delivered to Sterling prior to your death on a form provided by or acceptable to Sterling. If you do not make a valid beneficiary designation prior to your death, Sterling will distribute the assets in your HSA to your estate. In some states, your spouse’s consent may be necessary if you wish to name a person other than or in addition to your spouse as beneficiary or if you change an existing beneficiary designation. Please consult with your attorney before making your beneficiary designation.

What are the income tax consequences after your death?

If your spouse is the named beneficiary of your HSA, your HSA becomes the HSA of your spouse upon your death, subject to the completion of documents required by Sterling. The surviving spouse is subject to income tax only to the extent distributions from the HSA are not used for qualified medical expenses. If your HSA passes to a person other than your surviving spouse, the HSA ceases to be an HSA as of the date of your death, and the beneficiary is required to include the fair market value of the HSA assets as of the date of your death in his or her gross income. The includable amount is reduced by any payments from the HSA for your qualified medical expenses, if such payments are made within one year after your death.

If you have not made a valid beneficiary designation, your HSA ceases to be an HSA upon your death and the fair market value of the assets in your HSA, as of the date of death, is includable in your gross income for the year of death.

You can learn more here.

Hawaii’s Groundbreaking HSA Plans

by Gary Asato, Sterling Director of Sales – Hawaii

Employees in Hawaii are fortunate to have mandatory health insurance offered by their employers. But, they have limited choices with the number and type of health insurance policies offered by the employer. People who are self-employed, sole proprietors, or who are working part-time have even more limited choices for health insurance. Now, there appears to be a glimmer of hope for our community to have a financing tool to pay for their healthcare.

For Hawaii employers, however, some additional regulatory steps would still need to be taken before they could offer HSAs (Health Savings Accounts) to their employees. Under the Hawaii Prepaid Health Care Law, all health insurance plans offered by Hawaii employers must be approved as a qualified plan by the state government’s Hawaii Prepaid Health Care Council. In 2014, an employer sponsored HSA qualified plan was approved by the Hawaii Prepaid Health Care Council for 2015. The first approved employer HSA plan in Hawaii – unprecedented success. As of mid year 2015, two more employer sponsored HSA qualified plans were approved for 2016. Employers are able to offer additional choices as well as educating their employees to be smarter health care consumers.

Hawaii’s self-employed individuals, sole proprietors and those working part-time will have access to HSAs as a new and effective healthcare financing tool for themselves and their families through high deductible individual health plans via the Health Exchange and Hawaii insurance carriers. Individuals can purchase a high deductible health plan and a Sterling HSA online to create a personal healthcare financing tool.

Health Savings Accounts will be an important step to improve community health in Hawaii by giving consumers control over their own healthcare expenditures, the economic motivation to get healthy and stay healthy, and freedom of choice to blend medical practices and products in the best way to meet their own personal healthcare needs.

Learn more about the 2014 Year-End Devenir HSA Research Report.

Learn more about Health Savings Accounts.

From the CEO: Preventive Care Services & HSAs

I’m continuing my informal tutorial on HSAs. I’ve been asked about preventive care services and what qualifies as preventive care that must be provided by your insurance carrier without regard to any cost sharing. Generally, the list of allowed preventive care includes (but is not limited to) the following:

  1. Periodic health evaluations, including tests and diagnostic procedures
  2. Routine prenatal and well-child care
  3. Child and adult immunizations, including flu shots
  4. Stop smoking programs
  5. Obesity weight-loss programs
  6. Screening services, like mammograms, colonoscopies, PSA tests

The IRS makes clear that preventive care does not generally include any service or benefit intended to treat an existing illness, injury or condition.

I am sometimes asked about how drugs or medications are considered in light of preventive care services. The IRS code (Section 223(c)(2)(C) notes that drugs or medications are considered preventive when taken by a person who has developed risk factors for a disease that has not become clinically apparent or to prevent the reoccurrence of a disease from which a person has recovered. Examples include the treatment of high cholesterol with cholesterol-lowering medications like statins or the treatment of stroke victims with angiotensin-converting enzyme (ACE) inhibitors to prevent a reoccurrence.

If you would like more information about this, a comprehensive listing of covered preventive services can be found here.



Cora M. Tellez
President & CEO
Sterling Administration