When IRAs became mainstream, they quickly became assets that had to be addressed during the dissolution of marriages in Massachusetts and other states. The same is true with health savings accounts, or HSAs. HSAs have been around for about 13 years, and for some people who are getting a divorce, the balances in their HSAs have become relatively big.
HSAs are custodial accounts that are tax exempt. It is possible for people to make tax-deductible contributions up to certain annual amounts, and no income restrictions exist for contributing. These accounts have to be used in tandem with a qualified health insurance plan featuring a high deductible.
An HSA is handled in the same manner as an IRA during the divorce process. The interest in this type of account may be transferred between the two divorcing parties as part of the divorce agreement. In addition, according to the IRS, either parent may use HSA funds to cover their children’s eligible expenses. It does not matter which parent considers the children to be dependents for income tax purposes or which parent maintains physical custody of them.
When it comes to the splitting of assets, it can understandably be difficult for two people going through divorce to see eye to eye. However, if they are able to find common ground through negotiation, they may achieve a settlement that satisfies them both without having to go through the process of litigation. Proper legal guidance may help people to fight for their fair share of assets and their best interests during the marital dissolution process in Massachusetts.
Source: morningstar.com, “Handling HSAs After Death or Divorce“, Helen Modly, Oct. 22, 2016