What Happens To An HSA When You Die?

A Health Savings Account, or HSA, is arguably the best tax-advantaged account available in the United States. But dealing with an HSA when you can die can be more complicated than other types of investment accounts.

Contributions and qualified withdrawals are tax-free, which makes an HSA perhaps the only way you can earn, invest, and spend without paying taxes.

While we don’t usually like to think about it, we’re all going to die someday. Money-savvy folks want to know what happens to their HSAs when they die.

Here’s an in-depth look at what happens so you know how to include your HSA in your estate plan.

If Your Beneficiary Is Your Spouse

If your beneficiary is your spouse, he or she can inherit your HSA without tax implications. The account simply becomes theirs. If they have their own HSA, they can likely rollover your account into theirs for simplicity. If not, they can inherit the account as-is.

When a spouse incurs qualified medical expenses, they can withdraw from the IRA tax-free. Because of the major tax benefits, this is the ideal scenario for your HSA when you die.

If Your Beneficiary Is Not Your Spouse

Uncle Sam will want a cut if you don’t have a spouse or want to leave your HSA to someone else. Whether you leave the balance to your estate, children, favorite charitable organization, or anyone else, the inherited HSA is treated as regular income.

For example, if you leave your HSA with a $100,000 balance to your child, who has a 24% tax rate, they would have to pay $24,000 in taxes. Because of the significant costs, leaving an HSA to a spouse is better if possible.

But if you’re unmarried, the beneficiary or beneficiaries should be prepared to pay taxes on the inherited HSA.

What Is An HSA?

Health Savings Accounts (HSAs) are intended to assist with healthcare-related costs. And they have the best tax treatment around.

You can only open an HSA if you have the right type of insurance plan. If you do, you can contribute to the account pre-tax, meaning your total annual contributions lower your total taxes in the year you contribute. Then, if you withdraw to cover the cost of a doctor’s visit, prescription medication, or other eligible reason, your withdrawals are tax-free, including any capital gains.

This is truly an unbeatable deal for taxes. Retirement and education accounts typically allow you to contribute tax-free or withdraw tax-free, but you’ll have to choose one or the other. With an HSA, you don’t have to pay taxes if you follow the rules.

Balances can be held in a savings account or invested in mutual funds, exchange-traded funds (ETFs), stocks, and other commonly available investments from major brokerage firms. If you have an HSA and want to make the most of it, check out our list of the best HSA accounts.

The IRS limits the amount you can contribute to an HSA, and the limit tends to go up a little every year. Here’s a glance at 2025 HSA contribution limits:

2025 HSA Contribution Limits

• Individual: $4,300
• Family: $8,550

Who Can Open An HSA?

HSA accounts are only available to individuals and families with a high deductible health plan (HDHP). Specific limits of what constitutions an HDHP change annually. You can check with the IRS for the latest information.

For the 2025 tax year, these are the deductible and out-of-pocket requirements for an HDHP:

Minimum Deductible

• Individual: $1,650
• Family: $3,300

Maximum Out-of-Pocket

• Individual: $8,300
• Family: $16,600

How To Turn An HSA Into An Epic Retirement Account

While it’s intended for healthcare expenses, you can take advantage of an interesting loophole that allows you to effectively turn your HSA into a retirement account.

You can only make tax-free withdrawals from an HSA to cover a healthcare cost, but there’s no rule that you have to pay directly from the HSA or reimburse yourself right away. With a self-directed HSA, you can build up a long list of expenses and reimburse yourself well into the future, even decades in the future.

I use a database I built myself in Airtable to track every HSA-eligible expense. I keep the receipts in a folder per year (for paper receipts) or in my email inbox when I pay and receive the receipts online. You could also use a spreadsheet, a purpose-built app, a tracker built into your HSA provider’s website or app, or anywhere else convenient for you.

I have more than $19,000 in expenses I’ve added up for my family over the years, and I can tap into tax-free anytime I need to. But with tax-free investment growth, I’d rather avoid withdrawing from my HSA unless absolutely necessary.

Don’t Squander A Tax-Free Opportunity

Due to the massive opportunity to save on taxes, anyone who is eligible for an HSA should try to take advantage of it. Regardless, you now know what happens to your HSA when you die.

Finally, remember to keep your beneficiaries updated with your HSA and other investment accounts so they know your intentions if you pass away.