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The Matrimonial StrategistLJN NewslettersSections

<b><i>Practice Tip:</b></i> Health Savings Accounts As Assets in a Divorce

By Aaron Weems
April 02, 2015

As health care options continue to evolve, there has been a proliferation of high-deductible plans with the most popular being a health savings accounts (HSA). This plan takes advantage of the unique tax rules created by the IRS to maximize pre-tax contributions and appreciation on investments made within the account.

An HSA is a hybrid savings and investment account allowing the participant to save money in a traditional savings account, as well as investment in money market accounts or mutual funds through the HSA's managing bank. IRS rules allow for participants to reduce their income through pre-tax contributions, while employer contributions are not considered taxable income to the participant. Interest and earnings on the contributions accumulate tax free and the funds do not expire unlike other flexible savings accounts. When the participant begins taking distributions, the distributions are also tax free, provided they are used for “qualified medical expenses,” which can cover a wide range of expenditures.

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