Funeral Director Daily first reported on the “Funeral Coverage Act”, a proposed amendment to the Internal Revenue Code of 1986 to treat distributions from health savings accounts (HSA) for funeral expenses of the account beneficiary as qualified distributions last March.  (You can see that article here).  However, the bill never made its complete movement through Congress last session.

We have recently learned that the bill — HR 2436 — has been re-introduced.  You can follow the progress of the bill as it moves its way through Congress here.

The ultimate result of treating these monies paid to a funeral home from an HSA would be that they could be a tax-free payment for funeral expenses instead of a taxable distribution to the beneficiary(ies) or the estate.

According to the National Funeral Directors Association (NFDA) website:

“Like an IRA account, when a person sets up an HSA, they name a beneficiary. If the beneficiary is a surviving spouse, the unused portion of the decedent’s HSA passes directly to the spouse and becomes his or her HSA; there is no tax liability.

If the beneficiary is not the surviving spouse, the proceeds that pass to the beneficiary are taxed to the beneficiary as ordinary income. However, if the decedent died owing medical expenses, the proceeds in the HSA may be used to pay those medical expenses on a tax-free basis for up to one year after the death.

If no beneficiary is named, the proceeds of the HSA go to the decedent’s estate, and they are taxed as ordinary income on the decedent’s final personal income tax return.”

 

Related Article —  “Health Savings Accounts and Funeral Expenses:  A common sense solution for grieving families”.  NFDA

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  Don’t get me wrong — on a selfish note this bill would be great for funeral homes and for families that might struggle to pay for their death care costs.  It would give families another tool to stop some of them from taking on debt to pay funeral expenses. . . .And, that would be a good thing for those consumers.

However, there is, at least, two sides to every issue.  By allowing a “tax-free” distribution for this purpose, it eliminates the ability of our federal government to “take-in” a form of tax revenue.  And, there is a group that believes that revenue might be better used to pay down the nation’s debt than to give to families — some whom may have other ways to pay for the funeral costs.

Again, don’t get me wrong.  I’m not arguing against passing this bill — but this is how I learned to look at issues when I sat on the Board of Regents for the University of Minnesota.  I always had to look at both sides of the issue.  I learned that even when I had a personal viewpoint one way, voting the other way might be the best way for the University to move forward.  I’m just wondering if that is how members of Congress might see this issue.

So, while I am for this bill.  . I think that there will be challenges passing it moving forward because the net result is that it will add to the deficit and debt.

My Friday morning group:  During my winter in Florida I belong to a Minnesota Friday morning breakfast group.  We meet every Friday morning for breakfast and invite speakers to come to the event.  One of our speakers this winter was Congress member Rep. Michele Fischbach of Minnesota.  She is a member of the Ways and Means Committee and told us that her committee was already having these discussions about what will be in the, as President Trump calls it, “Big Beautiful Tax Cut” bill.  Congress member Fischbach explained the discussions are around exactly what I am talking about  —  “Maxium tax benefits to Americans versus the costs of decreased revenue to the National budget”.

HR 2436 – The “Funeral Coverage Act” was not introduced until March 15 — a period long after Congresswomen Fischbach told us that they were already considering what will be “in” and what will be “out” of the President’s proposed bill.

Related Article — Here’s an article Funeral Director Daily published in 2023 about this HSA/Funeral Cost idea well before it was introduced into Congress.

More news from the world of Death Care:

• Cemetery becomes city’s latest nature preserve.  BBC News (Great Britain)
• Watchdog “failed to monitor” funeral savings firm before collapse.  The Times of London (Great Britain)
• Illinois comptroller seeks to shut down crematory accused of improperly handling bodies.  CBS News

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