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How to Bequeath a Health Savings Account

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What happens to my health savings account when I die? Do my heirs have to pay taxes on the money in it? -J.Y., Port Charlotte, Fla.

See Also: Best Health Savings Account

You should name a beneficiary for your HSA. You can name anyone you want, but selecting a spouse is preferable because a spouse can use the inherited HSA tax-free for eligible medical expenses. If you name someone other than a spouse, the HSA money is disbursed to the beneficiary and is taxable. If you don't designate a beneficiary, the money will be included in your estate and will be taxed on your final income tax return.

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