Family Changes Related to Marriage, Divorce, and New Children

Marriage

When you get married, you may choose to have a high deductible family health insurance plan; however, you cannot have a joint HSA under both of your names. Since the IRS views married couples as a single tax unit, if either spouse has a family health plan, you and your spouse may only contribute up to the annual family maximum, currently $7,750, to one HSA or split however they like between the two HSAs (if both spouses have their own HSA).

If both spouses keep individual health insurance plans, they can contribute up to the individual contribution max in both HSAs, currently $3,850.

Regardless of how you choose to make your contributions, once you are married you and your spouse can use your individual HSAs to pay for each other's qualified medical expenses.

Divorce

Spouses do not jointly own an HSA. In the event of a divorce or legal separation, the HSA owned by one spouse may be divided or given in part or full to the other spouse by court judgment. The movement of all or part of your HSA to a spouse or former spouse as required by a divorce decree is not a taxable transfer.  A former spouse may avoid paying taxes on the account if the funds are transferred and held in an HSA. If the spouse puts the HSA funds into a different type of account, the money would be taxable.

New Child

After giving birth or adopting a child, add your new family member to your health insurance plan as soon as possible. Your HSA contribution limit will be increased to the family coverage limit on the first day of the first full month after which you move to a family-coverage HDHP. However, if you're already on a family plan, your contribution limit will stay the same. The family contribution limit does not change regardless of how many people are using the family health plan.

Many medical expenses related to the birth of a child are eligible for HSA reimbursement. The child's health expenses are also eligible if they are a dependent. 

If the parents are not married and not on the same health plan, the mother must use her own HSA for any eligible medical expenses throughout pregnancy. The child is eligible to be added to the health plan belonging to whichever parent claims the child as a tax dependent. As soon as the child is born, whichever parent added the child to their health plan would be able to use his or her HSA to pay for the child's medical expenses.

How to determine your new annual contribution limit 

When you go through a life change event, you may be changing your health plan from a single plan to a family plan or vice versa. When that happens, your annual contribution limit changes. Annual limits are established for both types of plans, but what happens for the year that your status changes?

There are two methods to determine your new HSA annual contribution limit when you have a mid-year status change.

Per IRS rules, the method you will use is the one that allows the largest maximum contribution. As a result, if you are changing to a family plan and intend that change to be a long term change, you will generally use the 13-month method:

Frequently asked questions