What happens when a TFSA holder dies
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A TFSA may continue or it may end
What happens after the death of a TFSA holder will vary according to the situation. It is important to find out certain details about the TFSA to understand if there are any tax implications.
It is helpful to know the following:
- The type of TFSA
- The type of beneficiary(ies)
- Whether any income from the TFSA was earned after the date of death
- How long, after the date of death, before amounts are distributed to beneficiaries
The items above may affect the following:
- Whether the deceased holder’s TFSA continues to exist or is considered to have ended
- How income earned from the TFSA after the date of death can be reported and taxed
- Whether a beneficiary can contribute amounts they receive to their own TFSA, and whether the contribution would affect their available contribution room
Different types of beneficiaries
There are two types of TFSA beneficiaries:
- Successor holder
- A survivor (spouse or common-law partner) of the deceased who is named as the new TFSA holder in the TFSA contract or will of the deceased holder
- Designated beneficiary
- A survivor (spouse or common-law partner) not named as successor holder, a family member or other person or organization that is named as a TFSA beneficiary in the TFSA contract or will of the deceased holder
Determining the type of beneficiary is the first important step. The type of beneficiary can be determined by:
- Designations that the deceased holder may have made in their TFSA contract
- Terms of the deceased holder's will (if there is one)
- Succession legislation in the province or territory of the deceased holder
TFSA holders who want to change a beneficiary designation they made in the past should contact their TFSA issuer.
For more information:
Beneficiary designation in Quebec
Quebec does not recognize the following designations for TFSAs:
- Successor holder
- Designated beneficiary (for deposit TFSAs or arrangements in trust only)
However, a surviving spouse or common-law partner in Quebec may still benefit from an exempt contribution if they designate the contribution as exempt.
Survivors in Quebec may make exempt contributions
Quebec survivors may contribute the amounts they receive to their own TFSA without affecting their unused contribution room if both of the following happens:
The survivor receives the amount and contributes it to their own TFSA no later than December 31 of the year following the year of death
The survivor files a Designation of an Exempt Contribution TFSA (RC240) within 30 days of making the contribution
For more information: Survivors may make exempt contributions
Non-resident beneficiary
If you are a non-resident of Canada for income tax purposes and are named as a beneficiary to a TFSA, there may be tax implications.
For more information: If you are a non-resident beneficiary of a TFSA
If there is no beneficiary
If there is no successor holder or beneficiary designated in the TFSA contract or will, the property held in the TFSA is directed to the deceased holder’s estate and is distributed according to the terms of the will.