Tag: HSA

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.

Don’t Forget! Maximize Your HSA to Reduce Taxes and Increase Savings

If your weekend plans include finishing up your taxes, don’t forget to first contribute the maximum to your Health Savings Account. By doing so, you can reduce your taxes  and increase your savings for healthcare or retirement expenses.

You can contribute for 2014 until April 15, 2015.

For 2014, you and/or your employer can contribute in total up to $3,300, if you are under age 55 and have single HSA compatible health coverage, and up to $6,550, if you are under 55 and have family HSA compatible health coverage. Be sure to note online or on your check that the contribution is for 2014.

HSA members who are 55 and older and not receiving Medicare benefits can make an additional “catch-up” contribution of $1,000. Your spouse is also entitled to a $1,000 catch-up contribution, if he/she meets the eligibility requirements of 55 years and older and not on Medicare benefits. Your spouse must open a spousal HSA account, a quick and easy process that we can help you with.

Note: If you’ve already filed your 2014 taxes and want to make an additional contribution to your HSA for 2014 up to the limits allowed, contact your tax advisor on how this impacts your tax filing.

For additional information, please contact Sterling customer service at customer.service@sterlingadministration.com or call 800-617-4729. Customer service representatives are available Monday – Friday from 8 am – 6 pm Pacific time.