That’s especially true if you hire a family member instead of going through a home-health agency. The HSA regulations do not specifically elaborate on whether a family member who helps you can be paid from an HSA, says Jeffrey Corliss, executive director of the RDM Financial Group at HighTower in Westport, Conn. “From our perspective, it is better to use an accredited agency, thereby removing this ambiguity,” he says.
Meanwhile, HSA-qualified LTC services must meet a “plan of care.” That’s not unlike a physician’s prescription—a document written by a licensed health-care practitioner. “[That’s] defined as any physician and any registered professional nurse, licensed social worker or other individual who meets such requirements as may be prescribed by the secretary of the Treasury,” says Harvey Cotton, a principal in the benefits consulting group of the Boston-based law firm Ropes & Gray.
Keep in mind that HSA distributions not deemed as qualified expenses will simply be taxed, and if the beneficiary is less than 65 years old, they will be subject to a 20% penalty.
“This is a very complicated area of tax law [and] the devil is in the details on a lot of this,” says Tim Steffen, director of advanced planning at Baird Private Wealth Management in Milwaukee. “The facts and circumstances of each case need to be evaluated separately.”