“Inherited HSA? The Entire Balance
is Taxable Income — This Year”
To get my complete article
with all the details…
Your client has been doing everything right with their HSA. Maximum contributions every year. No withdrawals. Letting it grow like a super IRA.
Now they’re seriously ill. Their adult child is the beneficiary. And nobody has told them what happens next.
When a non-spouse inherits an HSA, the account stops being an HSA the day the owner dies. The entire balance lands on the beneficiary’s tax return as ordinary income—that same year. No 10-year stretch like an inherited IRA. No deferral. All of it, at once.
A $100,000 HSA left to an adult child can trigger $33,700 in federal income tax in a single year.
Visit us to read: HSAs After Death: What You Need to Know