Advanced Underwriting Consultants

Ask the Experts – February 18

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: Two clients are getting married, each with separate health savings accounts. Can the two spouses combine their HSAs into one?

Answer: No. An individual cannot have a joint HSA. Each spouse who is an eligible individual who wants an HSA must open a separate HSA. Therefore, one spouse may not roll over her HSA into the other spouse’s HSA.

If the account holder dies leaving his HSA to his spouse, the HSA will be transferred to the surviving spouse. At this point, the surviving spouse can roll over the inherited HSA into her own HSA. For non-spousal beneficiaries, the HSA will be fully distributed and the funds will be included in the beneficiary’s gross income.

Your clients will probably want to maintain both accounts since distributions from an HSA are taxed as ordinary income and generally subject to an additional 20-percent tax if the amounts distributed are not used to pay or reimburse qualified medical expenses. Qualified medical expenses include those incurred by a spouse and dependents.

If your clients don’t want to maintain two accounts, they could use only one account to pay for qualified medical expenses and not make further contributions to that account. This way it would be depleted and closed.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.