Basis in HSA on death of spouse

Home Fairmark Forum Retirement Savings and Benefits Basis in HSA on death of spouse

Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • #6564
    sselm
    Participant

    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.

    #7206
    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.

    #7347
    sselm
    Participant

    H inherits W’s HSA, consisting of community property as described above. H sells some mutual fund shares in the account. No distributions are made.

    H now owes capital gain tax on this sale on his California return (though not on his federal return). The amount of capital gain depends on the basis.

    So my original question stands: Is there a step-up in basis in an HSA, as there would be for an ordinary retail account? Thanks.

    #7356
    kaneohe
    Participant

    My impression is that CA treats HSA as just another taxable account (unlike Feds) so you should get full step-up in basis for CA only.

    #7363
    sselm
    Participant

    That makes sense. Thanks.

Viewing 5 posts - 1 through 5 (of 5 total)
  • You must be logged in to reply to this topic.