2017, my wife and I had separate HSAs. 2018, I'm a dependent on her HSA. To avoid fees on my HSA can I transfer my HSA to my wifes? Is there a penalty or limit?

[Opus 17]

First, you can't transfer the money.

Second, any money already in an HSA may be spent for medical care for the owner, a spouse or dependents, regardless of how the money got in the account or any change in insurance circumstances since then.  You have to have qualifying HDHP insurance to make contributions, but it doesn't matter what your insurance is when you take distributions.

Third, I think you misunderstand your situation.  Exactly what kind of insurance coverage do you and your spouse have?

[helpmewithtax]

1. Both HSAs are with Payflex. They mailed me a transfer form, so it seems possible.  Maybe it wont transfer if my name is on the original and hers is on the other one.
2. I plan to use it for medical expenses, I am trying to avoid the account fees from Payflex since I don't have HDHP insurance from  current employer anymore.
3. We currently have HDHP insurance with an HSA thru her employer.

[Opus 17 · Accepted solution]

If your wife has an HDHP family plan that covers you, and you have no other insurance, then you are considered to be covered by an HDHP plan and are eligible to make contributions to an HSA that you own.  Your combined limit is still $6900 for 2018 (plus $1000 if you are 55 or older**), and your wife benefits by having her contributions taken out before social security and medicare tax, which saves an extra 7.65% compared to you making deductible after-tax contributions.  But, you are still allowed to contribute to an account if you like.

An HSA is a specialized account like an IRA, there is no legal way, other than in a divorce settlement, to transfer or roll money from your account into your wife's account.  Your only options for emptying the account to avoid fees is either,

1. spend from that account first until it is used up (as mentioned, you can use your account to pay qualified expenses for yourself, a spouse or a dependent)

2. do a rollover or transfer into a private HSA in your name with a different bank that charges lower fees (similar to doing an IRA rollover into an account with a different broker).  (A local bank near me offers an HSA with a monthly fee of $2.25 that is waived if the account balance is more than $3000.)

(Note that the catch up provision is person-specific.  If you are 55 and your spouse is under 55, you can contribute a total of $7900, but still only a max of $6900 in your wife's account.  Your extra $1000 catch up provision must go in an account in your name, assuming you are eligible to contribute.)

[Opus 17]

Here's another thought.  No matter what your medical needs are expected to be, you may want to contribute the maximum to your HSAs until you become ineligible due to Medicare or other insurance changes.  If you have access to investment options besides simple interest, the HSA may be preferred over a 401(k).  Here's why:
1. when you turn 65, you can withdraw from an HSA for any reason and pay regular income tax with no penalty, just like an IRA, but if you pay for medical expenses, it's tax-free.  So it's like a 401(k) with a bonus tax-free option.
2. employee contributions are exempt from FICA and Medicare tax, but you pay FICA and Medicare tax on your 401(k) contributions, so HSA contributions go a little farther and save you a little more in taxes.

About 2/3 of my HSA (excluding what I might need in one year) is invested in a mutual index fund that gained 20% last year, and I intend to max out my HSA every year that I can, before maxing out other options.