Can I Transfer My HSA to My Spouse?

A Health Savings Account (HSA) is a tax-advantaged savings account used for healthcare costs, available to those with a high-deductible health plan. These accounts are individually owned, which raises questions about how funds can be shared with or transferred to a spouse. The rules governing spousal access and transfers are specific. This article details how HSA funds can be used for a spouse’s benefit and the situations under which the account itself can be formally transferred.

Spousal Use of HSA Funds Without a Transfer

An HSA is an individual account, and joint HSAs are not permitted under IRS rules. Even if a married couple is covered by the same family health plan, each spouse who wants to contribute to an HSA must open a separate account. This means you cannot transfer ownership of your HSA to your spouse, as the funds and the account legally belong to the individual who established it.

While you cannot transfer the account itself, you are permitted to use the money in your HSA to pay for the qualified medical expenses of your spouse. This is true even if your spouse is not covered by your high-deductible health plan. The IRS allows tax-free distributions from an HSA for the medical expenses of the account holder, their spouse, and any tax dependents. A formal transfer is not necessary, as you can use your HSA debit card or reimburse yourself from the account for your spouse’s eligible costs, such as doctor visits, prescriptions, and dental care. This use does not create a taxable event.

Permitted Transfers to a Spouse

There are only two specific life events recognized by the IRS that permit the complete transfer of HSA assets to a spouse: transfers incident to a divorce and transfers upon the death of the account holder.

Transfer Incident to Divorce

In the event of a divorce or legal separation, an interest in an HSA can be transferred from one spouse to the other without tax consequences. This transfer must be explicitly detailed in a divorce decree or a written separation instrument. The IRS does not consider this a taxable distribution; the receiving spouse acquires the assets as their own HSA and becomes the new account holder. After the transfer, the original owner can no longer use those funds, even for their own children’s medical expenses, unless specified otherwise in the legal agreements.

Transfer Upon Death

The second scenario involves the death of the HSA owner. If the surviving spouse is the named beneficiary of the HSA, the account automatically transfers to them and becomes their own HSA. This allows the surviving spouse to continue using the funds for qualified medical expenses or to make contributions if they are eligible. If someone other than the spouse is named as the beneficiary, the account ceases to be an HSA upon the owner’s death, and the fair market value of the account becomes taxable income to the beneficiary in that year.

Process for Transferring HSA Assets

When a transfer is permitted due to divorce or death, specific procedural steps must be followed. The process is managed by the financial institution, or custodian, that holds the HSA. It requires formal documentation to ensure the transaction is not treated as a taxable distribution.

Information and Documents Required

To initiate the transfer, the receiving spouse will need to obtain a “trustee-to-trustee transfer” request form from the HSA custodian. Along with this completed form, you must provide legal documentation verifying the reason for the transfer. For a divorce, this means submitting a copy of the divorce decree or separation instrument. In the case of death, a certified copy of the death certificate is required.

The Submission Process

Once the transfer request form and the necessary legal documents are completed, they must be submitted to the HSA custodian. The custodian will then process the request and transfer the assets directly to the receiving spouse’s new or existing HSA. This direct trustee-to-trustee method is recommended to avoid potential tax issues. The process can take several weeks, typically between three and six, depending on the custodian’s processing times. Upon completion, the receiving spouse will receive a confirmation, and the assets will be available in their account.