Designation of an exempt contribution by a survivor
If designated as a beneficiary, the survivor has the option to contribute and designate all or a portion of a survivor payment as an exempt contribution to their own TFSA, without affecting their own unused TFSA contribution room, subject to certain conditions and limits.
Beneficiaries (other than the survivor) who receive a payment from the deceased holder's TFSA, cannot contribute and designate any amount as an exempt contribution.
For the survivor to designate an exempt contribution, the amount must be received and contributed to their TFSA during the rollover period. Also, the survivor must designate their survivor payments as an exempt contribution on Form RC240, Designation of an Exempt Contribution Tax-Free Savings Account (TFSA), and send the designation within 30 days after the day the contribution is made or at a later time as permitted by the Minister of National Revenue.
The total exempt contributions designated during the rollover period cannot exceed the fair market value of the deceased holder's TFSA at the time of death.
Generally, if the TFSA of the deceased holder includes an excess TFSA amount at the time of death, if payments are being received by more than one survivor, or if the survivor payment and/or the contribution is made after the rollover period, no amount of the survivor payment may be designated as an exempt contribution. If any of these circumstances are present, contact us to find out whether a designation can still be made.
Brian died on February 2, 2019. He was living with his common-law partner, Fred, in Ontario. The value of his trusteed TFSA on that date was $9,000. There was no excess TFSA amount in his account. In Brian's TFSA contract, he had not filled out the part about a successor holder, but he named Fred as the beneficiary. His estate was settled on August 15, 2019. By that time, an additional $150 of income had been earned, and the full amount of $9,150 was paid to Fred.
The value of Brian's TFSA as of the date of his death, $9,000, is not taxable. The additional income earned after the date of death, $150, is taxable to Fred. His T4A slip will show an amount in box 134 "Tax-Free Savings Account (TFSA) taxable amount" in the "Other information" section.
The amount paid to Fred, as the surviving common-law partner, is considered a survivor payment. Since the survivor payment was made during the rollover period, Fred can rollover up to $9,000 (the value of the TFSA as of the date of death) to his own TFSA, as an exempt contribution.
An exempt contribution does not affect Fred's unused TFSA contribution room. For the contribution of a survivor payment to be considered an exempt contribution during the rollover period, Fred must designate it as such on Form RC240, Designation of an Exempt Contribution Tax-Free Savings Account (TFSA), within 30 days after the contribution is made or at a later time as permitted by the Minister of National Revenue.
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