Basis in HSA on death of spouse

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  • #6579
    sselm
    Participant

    [Posted earlier in Retirement forum. Perhaps this one is more appropriate.]

    On the death of a spouse in a community property state, does an HSA receive a step-up in basis on the death of a spouse? Assume the HSA was created after the marriage began, and funded entirely with community property assets. This is in California, by the way, which taxes HSA distributions and so the basis is relevant. Thanks.

    #6597
    kaneohe
    Participant

    couldn’t find any links but I think so. HSA is CA is just another taxable account so you treat it differently than you do Federally.

    #6598
    Alan S.
    Participant

    I agree. As long as the HSA is otherwise considered to be CP, it should get a 100% basis adjustment upon the death of the HSA owner. Note that retirement accounts are also treated as CP even though titled just to just one individual, although basis adjustment does not apply to retirement accounts in the first place.

    #6673
    Lewis-H
    Participant

    If your beneficiary is your spouse, then your HSA, upon death, becomes your spouse’s HSA. The surviving spouse can continue to access HSA funds, and distributions for qualified medical expenses will be tax free, the same way they would be if distributed to the deceased account owner.

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