A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers enrolled in a qualified high-deductible health plan.
The funds contributed are not subject to federal income tax at the time of deposit. Qualified HSA providers include any IRS-approved IRA fiduciary. All HSA deposits become the property of the account holder. There is no deadline for self-reimbursements of qualified medical expenses, and funds deposited but not withdrawn each year carry over.
What happens to unused funds in an HSA depends upon whom you designate as the account beneficiary. If your spouse is the designated beneficiary, it will be treated as your spouse’s HSA after your death.
If someone other than your spouse is the beneficiary, the account ceases to be an HSA. The fair market value of the account becomes taxable to the beneficiary in the year you die, and may be reported as unclaimed property at some number of years determined by each individual state if contact with the owner is lost.