Interesting HSA Distribution Rule

[Martha]

Here is the IRS HSA publication which also talks about how an HSA is treated after death:

http://www.treas.gov/offices/public-affairs/hsa/

Too lazy tonight to read the statute or regs.

 

[mykidslovedogs]

Here is another handy guide that we like to give to our clients. It might answer some of your questions. # 6 on page 11 might clear up your question about withdrawls after rolling money into a 3rd HSA account.

 

[justin]

Here is another handy guide that we like to give to our clients. It might answer some of your questions. # 6 on page 11 might clear up your question about withdrawls after rolling money into a 3rd HSA account.

Sounds like #6 says I can rollover my account all I want and still withdraw all amounts previously incurred.

Looks like 26 USC 223 that martha linked to says that my estate can't take a huge reimbursement from my account after my death for any amounts except those expenses paid by a beneficiary of my HSA within 1 yr of my death. So maybe the final hospital bills leading up to my death, but not the 30 years of previous expenses covered by my hypothetical case-of-receipts.

For tax planning, it may make sense in some cases to take a reimbursement of all amounts eligible once you get "old" and your mortality risk increases. Otherwise your HSA may be treated as income to your beneficiaries (if your spouse isn't the beneficiary).

 

[Martha]

That is how I read it too Justin. At least there is no 10% penalty. But your estate may end up owing both estate taxes and income taxes on the money.

I agree with MKLDs that the change in trustee shouldn't matter.