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Tax Treatment of HSA After Death of Account Holder

The tax treatment of an HSA after the death of the account holder will vary based on the beneficiary of the HSA.

If the deceased account holder’s beneficiary is a spouse

The HSA is treated as the surviving spouse’s HSA. Withdrawals to the surviving spouse for eligible expenses are tax free.

If a non-spouse beneficiary is named

The HSA ceases to be an HSA as of the date of death. In this case, the value of the HSA is taxable to the beneficiary or to the estate of the account holder if a beneficiary is not named. The non-spouse beneficiary includes the balance of the HSA in his or her income for the year of the account holder’s death.

This rule also applies if the account holder names the estate or fails to name a beneficiary.
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