Ed Slott

Health savings accounts are not only for funding immediate medical needs. They offer three distinct tax benefits that make them a powerful form of retirement savings.

Here’s what advisers should know about this increasingly available option, so they can help clients make the most educated choice.

There are risks to this approach, however.

When a tax-deferred account is part of an estate, failure to follow the tax rules correctly can result in a financial disaster.

Clients who make these prohibited transactions can face devastating penalties.

There are limits to how much clients can contribute — exceeding these thresholds can result in costly penalties.

Advisers and clients may think it doesn't matter which account makes the distribution, as long as the total calculated amount is taken from some account. They are wrong.

Clients who borrow from their company retirement plans can often get a good rate with no hassle. But if they miss payments, they might face nasty tax charges.

Now harsh penalties and taxes on late 60-day rollovers from company plans and IRAs can be avoided, but beware: There are some rollover mistakes that still cannot be fixed.

Because community property law can dictate who gets an IRA after death, it must be taken into account when a client names a beneficiary.