If the designated beneficiary is not the account beneficiary's surviving spouse, or there is no designated beneficiary, the account ceases to be an HSA as of the date of death. The beneficiary completes Form 8889 as follows.
Enter “Death of HSA account beneficiary” across the top of Form 8889.
Enter the name(s) shown on the beneficiary's tax return and the beneficiary's SSN in the spaces provided at the top of the form and skip Part I.
On Part II, line 14a, enter the fair market value of the HSA as of the date of death.
On Part II, line 15, for a beneficiary other than the estate, enter qualified medical expenses incurred by the account beneficiary before the date of death that the beneficiary paid within 1 year after the date of death.
Complete the rest of Part II.
If the account beneficiary's estate is the beneficiary, the value of the HSA as of the date of death is included on the account beneficiary's final income tax return. Complete Form 8889 as described above, except you should complete Part I, if applicable.
The distribution is not subject to the additional 20% tax. Report any earnings on the account after the date of death as income on your tax return.
