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Health savings accounts must be addressed during divorce

Health savings accounts may seem as though they have been around forever. The reality is that they have been in existence in the United States for only 13 years. As a result, those who are going through divorce in New York may understandably not know how to deal with them during the process of property division.

Health savings accounts are essentially custodial accounts that are tax exempt. Account holders can make tax-deductible contributions up to particular amounts each year, and no income restrictions exist for making contributions. These accounts have to be used along with qualified health insurance plans that feature high deductibles.

During the dissolution of a marriage, a health savings account is handled in the same manner as an individual retirement account. The two spouses who are getting divorced may decide to transfer the interest in a health savings account between them as part of their divorce agreement. In addition, when a spouse is transferring a health savings account, he or she can move it to a brand-new administrator or trustee, and invest it as he or she sees fit. Updating health savings account beneficiaries is critical for preventing unintended distributions at death.

Divorce is a complex legal process, and the higher value one's assets are, the more complicated the marital split-up can be. However, an attorney in New York can provide guidance at each step, whether at the negotiation table or at trial. The attorney will push for an outcome that is ultimately in one's best interests considering the circumstances surrounding the divorce proceeding.

Source: morningstar.com, "Handling HSAs After Death or Divorce", Helen Modly, June 5, 2017

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