January 1, 2010

Q: I have had an HSA through work for the past 2.5 years for the benefit of myself and my wife and children. In May of this year I ceased getting high deductible insurance through my employer and thus stopped contributing to my HSA. When my high deductible insurance was dropped, myself and my wife started coverage via a high deductible plan through my wife's employer. Can I rollover the assets in my HSA into my wife's HSA without adverse tax consequences? I was told by my wife's HSA custodian that they cannot accept a direct rollover from my HSA custodian. Can I take direct possession of my HSA assets and then deposit them into my wife's HSA myself without them being seen as excess contributions to her HSA?

A: No. Health Savings Accounts are individually owned. HSAs operate in the same manner as IRAs in this regard and can be transferred tax-free to another person only at the death of the owner. However, you ability to use the accounts to cover family expenses is unaffected by your change of insurance. There is no requirement that insurance be maintained to utilize the tax-free withdrawals to cover expenses. In the end, the only effect is that your family must now keep two different HSA accounts. If keeping two accounts is an inconvenience, you could use only your account to pay out-of-pocket expenses. Since your account is not receiving any additional contributions, presumably it will eventually be deleted and the account will then be closed.



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