“It’s Your Money & Your HEALTH
Take Charge of Both TODAY!”
Q: What is the basis for the gift of the funding of another person’s Health Savings Account to another person?
A: Federal Law allows any one to contribute to the Health Savings Account of any other individual or family. See line 25; 2007-1040 and the line on the form 8889, HSA Instructions
Q: Are the donated amounts tax deductible?
A: This same law allows the person receiving the gift to deduct the full contribution using line 25 on their form 1040 for 2007.
Q: How much is a donor allowed to donate?
A: The maximum deduction for 2008 is $2,900 for all individuals, and $5,800 for a family.
Q: What other actions must happen in order to make this HSA acceptable?
A: A requirement of the law is that in order to establish an HSA, the account holder must obtain insurance coverage with what is called an HDHP, or High Deductible Health Plan
Q: Can I purchase that health insurance known as ‘HDHP’, too?
A: While the GIFT HSA High Deductible Health Plan makes a meaningful graduation gift the cost of the premium is not deductible to you. The HDHP applicant must to be the insured while the premium payer and account funder/donor can be anyone.
Q: Does the GIFT HSA grow each year or does it all have to be spent at the end of the Tax Year?
A: Unlike other plans, for instance the FSA and the HRA, the funds in the HSA is allowed to grow each year with the addition of new contributions. The balance can also be invested for long-term growth in mutual funds, or any other growth vehicle provided the account administrator provides this.
Q: Can the money in the account be used for other things than what the legislation or the gift donor intended?
A: All of the HSA funds can be spent for other things, like an IRA can, but there is a penalty of 10% and the money will be included in the taxable income for the year it is taken. In some cases there is an excise tax due too.
Q: Who keeps track of the HSA funds and how they are spent on health care?
A: The Health Savings Account Bank administrator manages the fund balance and subsequent expenditures. The proper spending of funds is between the IRS and the individual; the donor has no responsibility to oversee its use. This HSA accountholder must keep good records of all expenses in case of an IRS audit.
Q: Can anyone else contribute to this new HSA account?
A: Yes, anyone can, even employers. The maximum limits must be respected, all excess contributions are taxed heavily with an excise tax, and the inclusion of those disallowed expenditure amounts in current year income.
Q: What makes this GIFT HSA so unusual?
A: At this time it is the only HSA funding plan that uses a national, internet-based, distribution program which easily combines the donor, the graduate or recipient, with access to the HDHP insurance companies, all in one place. Every effort is made to ensure that not only does a GIFT HSA get set up but the account holder is contacted regularly with insurance information, quotes, and regular reminders that insurance has to be in place and is the only health insurance in place
Q: The Original GIFT HSA seems like a good idea for my family member this year of graduation, but can I donate to help out again next year?
A: You can donate at any time and up to the full allowable amount, each year, but is hoped that with employment combined with this HDHP health insurance ownership, the employer will contribute as well.
Q: Even though I cannot deduct this gift on my 1040, will it make sense to use this strategy as part of my annual gifting allowance?
A: Since you are allowed to give away up to $12,000 in 2006 per gift, it does make sense to give this “Gift of Health” every year!
Q: Where can I get advice on my specific questions?
A: You can email to gwillards@consultant.com for quick answers to your questions.
