Your HSA is an inheritable account. What happens to your HSA when you die depends who you named as your beneficiary.

1. Spouse designated beneficiary. If your spouse is your designated beneficiary, the account will be treated as your spouse’s HSA after your death. The account will continue to be tax-free for qualified medical distributions. If your spouse is covered by a qualified HDHP, contributions to the account may also be made tax-free, up to maximum annual contribution limits.
2. Other than Spouse designated beneficiary. If you designate someone other than your spouse as the beneficiary of your HSA:
• The account stops being an HSA on the date of your death;
• The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die (without penalties); and
• The amount taxable to a beneficiary (other than your estate) is reduced by any qualified medical expenses you incurred prior to your death that are paid from the HSA by the beneficiary within one year after the date of death.
3. Your estate is the beneficiary. If your estate is the beneficiary of your HSA, the value of your account is included on your final income tax return. NO designated beneficiary on file. If you do not have a beneficiary on file, the funds are payable to the accountholders estate.

 At age 65 and older, your funds continue to be available without federal taxes or state tax (for most states) for qualified medical expenses; for instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies. If you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the monies for non-qualified expenses, the distribution becomes taxable, but exempt from the 20 percent penalty. With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.

Health Savings Accounts (HSAs) are tax-advantaged medical savings accounts available to individuals who are enrolled in a Qualified High Deductible Health Plan (HDHP). HSAs are owned by the individual, unlike other types of benefit accounts such as Health Reimbursement Arrangements (HRAs) and Flexible Spending Account (FSA). HSA funds also roll over and accumulate year over year if not spent, with the ability to earn tax-free interest on the account. HSA funds may be used to pay for qualified medical, dental and vision expenses tax-free at any time.

With a high-deductible health plan, you have the security of comprehensive health care coverage. Like a traditional plan, you are responsible for paying for your qualified medical expenses up to the in-network deductible; however, the deductible will be higher, and you can use HSA funds to pay for these expenses. After the annual deductible is met, you are responsible only for a portion of your medical expenses through coinsurance or co-payments, just as with a traditional health plan. The deductible and maximum out-of-pocket expenses are indexed annually for inflation by the IRS and US Department of Treasury.