Something like this
@user1 = User.find(1);
@user2 = User.find(2);
Contact.where("user_id = ?", @user2.id).update_all(:user_id => @user1.id)
@user2.destroy
in case of generalize solution
place file /lib/acts_as_user_merge.rb
module UserMerge
  module ActsAsUserMerge
    module Base
      def self.included(klass)
        klass.class_eval do
          extend Config
        end
      end
    end
    module Config
        def acts_as_user_merge
            include ::UserMerge::ActsAsUserMerge::InstanceMethods
        end
    end
    module InstanceMethods    
      def merge(user)
        models = Array.new
        models_names = User.reflections.collect{|a, b| b.class_name if b.macro==:has_many}.compact
        models_names.each do |name|
          models << Object.const_get name
        end
        models.each do |model|
          model.where("user_id = ?", user.id).update_all(:user_id => self.id)
        end
        user.destroy
      end
    end
  end
end
::ActiveRecord::Base.send :include, ::UserMerge::ActsAsUserMerge::Base
how to use
User < ActiveRecord::Base
  has_many ...
  acts_as_user_merge
end
@user1.merge(@user2)
kinda messy and not tested but should give you an idea