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What happens to a TFSA when a spouse dies?

Tuesday November 29, 2022

What happens to a TFSA when a spouse dies?

In most provinces, including Ontario, there are two options if you want your spouse (or common-law partner) to inherit your tax-free savings account (TFSA): they can be named the Successor Holder, or they can be named a beneficiary. There is a noteworthy difference between the two. As the Successor Holder, your spouse or common-law partner receives your TFSA account at the time of your death. As beneficiary, they receive the money held in your TFSA at the time of your death.

Successor Holder
Only a spouse or common-law partner can be named as Successor Holder for a TFSA. When you name your spouse as Successor Holder, they immediately assume ownership of your TFSA account at the time of your death. In this situation, the TFSA continues to exist, the tax-exempt status of the TFSA is maintained (including any income earned after the date of death), and the TFSA contribution room of your spouse is not affected. Your spouse can then either choose to maintain two separate TFSA accounts, or consolidate your TFSA with their own. After taking ownership of your TFSA, your spouse is able to add to it (assuming there is contribution room) or make tax-free withdrawals from the account at their discretion.

Survivor Beneficiary
When you establish a TFSA and name your spouse or common-law partner as beneficiary, the money in the TFSA still passes to them on a tax-exempt basis, but any growth in the TFSA after your date of death will be considered taxable income.

As a beneficiary instead of Successor Holder, your spouse can still take advantage of a tax-free transfer to their own TFSA. During a ‘rollover period’ (which would begin on the day of death and end on December 31st of the following year) your spouse is allowed to transfer funds from your TFSA to their own TFSA. Transfers during this period are considered ‘exempt contributions’ and would not impact your spouse’s TFSA contribution room.

Note: Since any TFSA growth after the date of death is taxable, this transfer should occur as quickly as possible.

Other designated beneficiaries
Although only a spouse or common-law partner can be named Successor Holder, you may also opt to designate brothers, sisters, parents, children, friends, or a qualified charity as your TFSA beneficiary.

As with a spousal beneficiary, the money in your TFSA at the time of your death will pass to the beneficiary on a tax-exempt basis, but any growth in the TFSA after that date will be taxable.

Only beneficiaries who are spouses and common-law partners can take advantage of the tax-free transfer during rollover period, but any beneficiary can contribute the money they receive from your TFSA to their own TFSA, as long as they have unused contribution room available.

Note: If there is no Successor Holder or beneficiary named for your TFSA, the TFSA will be payable to your estate on your death and subject to probate and estate administration fees.

S+C Partners is committed to helping you
If you opened a TFSA when they were first introduced, you may not have had the option of naming a Successor Holder. If you are unsure, we recommend that you check with your financial institution or financial advisor. Our dedicated tax team and fully qualified and experienced Trust and Estate Practitioners are also here to help you. Please call us at 905-821-9215 or email us at if you have any questions or require any assistance.

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