Death and FHSAs

If you are a survivor who was designated as the successor holder  of the FHSA and you are a qualifying individual  at the time of the holder’s death, you will become the new holder of the FHSA immediately after the death of the holder. As the successor holder of the FHSA, you will be subject to the normal FHSA rules.

You will be considered to have entered into a new qualifying arrangement in respect of the FHSA unless the full balance of the FHSA is:

If you are considered to have entered into a new qualifying arrangement in respect of this FHSA, you will be considered to have opened the FHSA on the date you became the successor holder. 

If you choose to directly transfer the property to your RRSPs or RRIFs, you must fill out RC722, Transfer from an FHSA to an FHSA, RRSP or RRIF After the Death of the Holder and give it to your RRSP issuer or RRIF carrier.

Reporting

After you become the successor holder of the FHSA, the normal transfer and withdrawal rules will apply. For more information, go to Transfers between FHSAs and other registered plans and Withdrawals from your FHSAs.

If the deceased holder had an excess FHSA amount at the time of their death, special rules will apply. Information about these rules will be available at a later date.

• Example – Survivor who decides to keep the FHSA

  When Antonio opened his FHSA on May 1, 2023, he designated his spouse, Ida, as the successor holder of his FHSA. Antonio died on October 13, 2023. Antonio did not have an excess FHSA amount on the date of his death.

  When Antonio died, Ida was a qualifying individual and decided to keep Antonio’s FHSA. Ida did not have her own FHSA at the time of Antonio’s death, therefore, the start of her maximum participation period would be October 13, 2023.

  Example – Survivor who decides to not keep the FHSA

  Nicole is the holder of an FHSA who died on September 1, 2023. Prior to her death, Nicole designated her common-law partner, Kenneth, as the successor holder of her FHSA. Nicole did not have an excess FHSA amount on the date of her death.

  At the time of Nicole’s death, Kenneth was a qualifying individual but he did not want to keep the FHSA. He decided that he wanted to receive all the property  of the FHSA as a taxable withdrawal and to close the FHSA.

  On October 5, 2023, Kenneth made a taxable withdrawal of all the property of the FHSA. Kenneth will have to report the amount withdrawn as income and can claim the tax withheld as a credit towards any tax owing on his 2023 income tax and benefit return.

If you are a survivor who was designated as the successor holder  of the FHSA but you are not a qualifying individual  at the time of the FHSA holder’s death, you cannot become the new holder of the FHSA.

You will be required to withdraw or transfer all of the property  of the FHSA by the end of the exempt period  by either:

If you choose to directly transfer the property to your RRSPs or RRIFs, you must fill out RC722, Transfer from an FHSA to an FHSA, RRSP or RRIF After the Death of the Holder and give it to your RRSP issuer or RRIF carrier.

Reporting

Generally, if you make a direct transfer to your RRSPs or RRIFs, there will be no immediate tax consequences.

Any amounts you receive as a taxable distribution from the FHSA will have to be included as income on your income tax and benefit return for the year received. These amounts will be subject to income tax withholding and can be claimed on your income tax and benefit return as a credit towards any tax owing for the year received.

If the deceased holder had an excess FHSA amount at the time of their death, special rules may apply. Information about these rules will be available at a later date.

• Example – survivor who is not a qualifying individual

  Brad is the holder of an FHSA who died in August 2023. Prior to his death, Brad designated his spouse, Kyle, as the successor holder of his FHSA. Brad did not have an excess FHSA amount on the date of his death.

  Kyle has been a non-resident of Canada since January 2023, therefore, he is not considered to be a qualifying individual and cannot become the holder of the FHSA. Kyle must transfer or withdraw all of the property of the FHSA by the end of the day on December 31, 2024.

  Kyle decided to fill out Form RC722, Transfer from an FHSA to an FHSA, RRSP, or RRIF After the Death of the Holder and gave it to his RRSP issuer to complete a direct transfer of all the property of the FHSA to his own RRSP. The direct transfer of all of the property of the FHSA to Kyle’s RRSP was completed in December 2023. This transfer has no immediate tax consequences for Kyle.

If you are a survivor who has been designated as a beneficiary (not the successor holder ) in the deceased holder’s FHSA contract or in the deceased holder’s will, you cannot become the new holder of the FHSA.

Reporting during the exempt period

During the exempt period , you can do the following with the portion of the property  of the FHSA that you are entitled to:

Generally, if you make a direct transfer to your FHSAs, RRSPs or RRIFs, there will be no immediate tax consequences. . If you choose to directly transfer the property to your FHSAs, RRSPs or RRIFs, you must fill out RC722, Transfer from an FHSA to an FHSA, RRSP or RRIF After the Death of the Holder and give it to your FHSA or RRSP issuer or RRIF carrier.

Any amount you receive as a taxable distribution from the FHSA will have to be included as income on your income tax and benefit return for the year received. These amounts will be subject to income tax withholding and can be claimed on your income tax and benefit return as a credit towards any tax owing for the year received.

If there is property remaining in the FHSA at the end of the exempt period, you must include the FMV of any property in the FHSA you are entitled to as income on your income tax and benefit return for that year.

If the deceased holder had an excess FHSA amount at the time of their death, special rules may apply. Information about these rules will be available at a later date.

Reporting after the exempt period

The FHSA will lose its status as an FHSA at the end of the exempt period. The tax treatment of any income earned in the deceased holder’s account after the exempt period depends on the type of FHSA it was. If you do not know what type of FHSA the deceased had, ask the financial institution managing the FHSA if it was a depositary, trusteed or insured FHSA.

Depositary FHSA

Any income earned in the deceased holder’s depositary account after the exempt period and paid to the designated beneficiaries should be reported in accordance with normal taxation rules.

Trusteed FHSA

Any income earned in the deceased holder’s trust after the exempt period and paid to the designated beneficiaries will be reported by the trust. Only the part of the income earned in this period that is not taxable to the trust is reported by the beneficiary. A beneficiary will not have to pay tax on any part of the amount they received, to the extent that the funds can reasonably be regarded as having been included in the trust’s income.

Insured FHSA

Any income earned in the deceased holder’s insured product after the exempt period and paid to the designated beneficiaries is reported in the same way as described in the Reporting during the exempt period section.

Reporting during the exempt period

Where there are no designated beneficiaries in the deceased holder’s FHSA contract or in the deceased holder’s will, the amounts from the FHSA will be distributed to the deceased holder’s estate and treated as income of the estate.

However, if you have a beneficial interest in the deceased holder’s estate, you and the legal representative of the deceased holder’s estate may choose to do the following:

To complete the joint designation, you and the legal representative must fill out Form RC724, Joint Designation for a Deemed Transfer or Distribution from an FHSA after the Death of the Holder. 

• Example – Joint designation of a transfer

  Horace is the holder of an FHSA who died on June 25, 2023. The FHSA contract designated his estate as the sole beneficiary. His wife, Audrey, was a beneficiary of the estate. Horace did not have an excess FHSA amount at the time of his death.

  All of the property of Horace’s FHSA was distributed to his estate on August 5, 2023. Horace’s FHSA had an FMV of $8,000 immediately before the distribution occurred.

  On September 3, 2023, Audrey and the legal representative of Horace’s estate determined that Audrey was entitled to $3,000 of the FHSA from the estate. They completed Form RC724, Joint Designation for a Deemed Transfer or Distribution from an FHSA after the Death of the Holder and jointly elected to have the $3,000 treated as a deemed transfer from Horace’s FHSA (not from the estate) to Audrey’s RRSP. The transfer was completed on September 7, 2023.

  As a result of the joint designation, the $3,000 was treated as a tax-deferred transfer from Horace’s FHSA to Audrey’s RRSP. There were no immediate tax consequences for Audrey.

  As a result of the joint designation, Horace’s estate was only required to report $5,000 ($8,000 minus $3,000) as its income from the FHSA for 2023.

• Example – Joint designation of a distribution

  Sakura is the holder of an FHSA who died on November 15, 2023. The FHSA contract designated her estate as the sole beneficiary. Her husband, Bob, was a beneficiary of the estate. Sakura did not have an excess FHSA amount at the time of her death.

  All of the property in Sakura’s FHSA was distributed to her estate on January 10, 2024. Sakura’s FHSA had an FMV of $8,100 immediately before the distribution occurred. On February 1, 2024, $5,000 from Sakura’s estate was paid out to Bob.

  Bob and the legal representative of Sakura’s estate filled out Form RC724, Joint Designation for a Deemed Transfer or Distribution from an FHSA after the Death of the Holder and jointly elected to treat the $5,000 as a deemed distribution from the FHSA (not from the estate).

  As a result of the joint designation, Bob reported the $5,000 that he received as income when he filed his 2024 income tax and benefit return.

  As a result of the joint designation, Sakura’s estate only reported $3,100 ($8,100 minus $5,000) as its income from the FHSA for 2024.

Reporting after the exempt period

The FHSA will lose its status as an FHSA at the end of the exempt period. The tax treatment of any income earned in the deceased holder’s account after the exempt period depends on the type of FHSA it was. If you do not know what type of FHSA the deceased had, ask the financial institution managing the FHSA if it was a depositary, trusteed or insured FHSA.

Depositary FHSA

Any income earned in the deceased holder’s depositary account after the exempt period and paid to the deceased holder’s estate should be reported in accordance with normal taxation rules.

Trusteed FHSA

Any income earned in the deceased holder’s trust after the exempt period and paid to the deceased holder’s estate will be reported by the trust. Only the part of the income earned in this period that is not taxable to the trust is reported by the beneficiary. A beneficiary will not have to pay tax on any part of the amount they received to the extent that the funds can reasonably be regarded as having been included in the trust’s income.

Insured FHSA

Any income earned in the deceased holder’s insured product after the exempt period and paid to the deceased holder’s estate is reported in the same way as described in the Reporting during the exempt period section.