Death of a Tax-Free Savings Account holder

The topics below provide information on the reporting requirements that apply when the last holder dies and, as a result, the arrangement ceases to be a tax-free savings account (TFSA).

This information does not apply if the holder named their spouse or common-law partner as the successor holder of the TFSA. If this is the case, the arrangement maintains its tax-exempt status as a TFSA.

The tax treatment and reporting requirements depend on whether the TFSA is a deposit, an annuity contract, or a trust.

On this page

Deposit or annuity contract TFSA

When the last holder of a deposit or an annuity contract TFSA dies, the arrangement ceases to be a TFSA. The FMV of the TFSA at the date of death will be received tax-free by the deceased’s estate or other designated beneficiaries. There are no reporting requirements for these amounts.

Any investment income or gains that accrue under the former TFSA after the date of death will be taxable under the regular taxation rules that apply depending on the specific characteristics of the deposit or annuity contract. For more information on how to report these amounts, see Guide T4015, T5 Guide – Return of Investment Income, or Guide T4013, T3 Trust Guide, as applicable.

Trust governed by a TFSA

When the last holder of a TFSA which governs a trust dies, the arrangement continues to be treated as a TFSA for certain limited purposes. The main effect is to allow the trust to maintain its tax-exempt status until the end of the exempt period, which is the earlier of the end of the year following the year of death of the holder or when the trust ceases to exist.

While the trust maintains its exempt status, any payment made from the trust during the exempt period to the deceased’s estate or another designated beneficiary will be included in the recipient’s income for the year it’s received, except to the extent designated by the trust as being attributable to the FMV of the TFSA at death.

That is, only the portion of the payment that represents the distribution of post-death investment income or gains will be taxable.

Designated beneficiaries

Designated beneficiaries can include a survivor who has not been named as a successor holder, former spouses or common-law partners, children, a designated subsequent survivor holder who is the new spouse or common-law partner of the successor holder, and qualified donees.

Example of tax treatments

Filing T4A and NR4 slips

You have to prepare and file a T4A slip to report any taxable payments that you make each year during the exempt period to a beneficiary who is a resident of Canada. You do not need to report amounts that are required to be included in the income of a trust that is a former TFSA trust in its first taxable year. There is no requirement to withhold tax on these amounts.

The income must be recorded in box 134 “Tax-Free Savings Account taxable amount” in the “Other information” section of the T4A slip. Send copies of the T4A slip to the recipient’s last known address.

Note

You can also send a copy of one of these slips in electronic format to the recipient if you received the recipient’s consent in writing or electronic format.

For more information, go to Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.

You have to prepare and file an NR4 slip to report any taxable payments that you make each year during the exempt period to a beneficiary who is a non-resident of Canada. You are also required to withhold and remit non-resident withholding tax on these payments.

For more information on how to fill out an NR4 information return, go to Guide T4061, NR4 – Non-Resident Tax Withholding, Remitting, and Reporting.

Filing the T3RET, T3 Trust Income Tax and Information Return

If the trust still exists at the end of the exempt period, the trust will become taxable from that point forward and will have to file a T3RET, T3 Trust Income Tax and Information Return, each year that it continues to exist. In its first taxable year, the trust will be required to include in its income any post-death income or gains that were not paid out to beneficiaries during the exempt period.

Forms and publications

Page details

Date modified: