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Tax-Free Savings Accounts (TFSAs) - Death of the TFSA Holder
Income Tax Act s. 146.2
TFSA Successor Holder vs Beneficiary
Spouse or Common-Law Partner Named as TFSA Beneficiary not Successor Holder
Named TFSA Beneficiaries and Probate
No TFSA Successor Holder or Beneficiary
Canada Revenue Agency (CRA) Resources
TFSA Successor Holder
A TFSA holder can name a spouse or common-law partner as the "successor holder" in the TFSA contract, or in their will. On the death of the holder, the spouse becomes the new holder, keeping the tax-exempt status of the TFSA. This will not affect the TFSA contribution room of the spouse. The TFSA now belongs to the spouse, and is treated the same as any other TFSA of the spouse.
TFSA Successor Holder vs Beneficiary
The Income Tax Act only allows the tax exempt status of the TFSA to be passed on to a spouse or common-law partner who is a successor holder, which differs from a beneficiary. If some other person is named as a beneficiary of the TFSA, the account will no longer be a TFSA after the death of the holder, and the income from the TFSA will no longer be exempt.
Whether or not a beneficiary can be named in a TFSA contract depends on provincial or territorial legislation. By now, most provinces have probably revised their legislation to allow for this. Check with your financial institution.
Tax Tip: Name your spouse as your TFSA successor holder, not beneficiary!
Spouse or Common-Law Partner Named as TFSA Beneficiary not Successor Holder - Not Good
If a survivor (surviving spouse or common-law partner) has not been named as a successor holder, but as a beneficiary, they will not automatically become the new holder of the TFSA upon the death of the original holder.
A survivor who has been designated as a beneficiary has the option to contribute all or part of their survivor payment from the TFSA as an exempt contribution to their own TFSA, subject to certain conditions. This will not affect their own unused TFSA contribution room
The maximum tax-free amount that can be contributed to the TFSA of a spouse who is a beneficiary is the value of the TFSA at the time of death of the holder. Any increase in value, or income earned within the TFSA up to the time of the transfer will be taxable to the spouse on 100% of the value. See Beneficiaries: beware of what can go wrong if someone with a TFSA dies by Jamie Golombek, FCA, FCPA, CFP, CLU, TEP.
To designate an exempt contribution, the amount must be received and contributed to their TFSA during the "rollover period", which is the period that begins when the TFSA holder dies, and ends at the end of the calendar year following the date of death. Form RC240, Designation of an Exempt Contribution - Tax-Free Savings Account (TFSA) must be completed and sent to Canada Revenue Agency within 30 days after the date of the contribution.
TFSA Secondary Beneficiaries
Secondary (alternate) beneficiaries can also be named (again, depending on your province), so that if the successor holder predeceases the holder, the TFSA can be transferred to another beneficiary or beneficiaries. This would avoid probate on the TFSA. The form for doing this with TD is form 529214 Tax-Free Savings Account Designation of Successor Holder and/or Beneficiary. This form indicates that in Quebec, the designation of a beneficiary and/or successor holder can be made only in a will or marriage contract.
Tax Tip: If you name a successor holder and 1 or more alternate beneficiaries, your beneficiary (or beneficiaries) will have to change if one of them passes away before you.
It may be easier to NOT name alternate beneficiaries if you already have a successor holder. This can be addressed again if your successor holder predeceases you.
Named TFSA Beneficiaries and Probate
Assets with named beneficiaries such as life insurance policies or RRSPs are usually excluded in determining the value of an estate for purposes of probate (but RRSP value would be subject to income tax payable by the estate). A TFSA with a named beneficiary would also be excluded from probate. Again, this would depend on provincial legislation. For example, the British Columbia Wills, Estates and Succession Act s. 95 provides that:
A benefit payable to a designated beneficiary or to a trustee appointed under section 92 under a benefit plan on the death of a participant does not form part of the participant's estate and is not subject to the claims of the participant's creditors.
S. 1 of the same Act provides that RRSPs and TFSAs, among other things, are benefit plans for purposes of the Act.
Tax Tip: Be careful about naming alternate beneficiaries in your TFSA. If one of them predeceases you and you don't revise your TFSA beneficiaries, the entire TFSA will go to the remaining beneficiary or beneficiaries.
No TFSA Successor Holder or Beneficiary
Where no successor holder is named for the TFSA, the proceeds of the account will become part of the estate of the deceased. If a surviving spouse/common-law partner receives proceeds from the TFSA, the proceeds can be used to make an exempt contribution to the survivor's TFSA, and not affect the contribution room of the survivor, as long as
 | it is done before the end of the first calendar year following the holder's death (rollover period), and |
| it is designated as an exempt contribution in the survivor's income tax return for the year the contribution is made. |
Where there is no spouse or common-law partner named as the successor holder, a TFSA that is a trust will not lose its tax-exempt status until the earlier of
| the time it ceases to exist (completely paid out to beneficiaries), or |
| end of first calendar year following the holder's death. |
Any payments to beneficiaries, including during this exempt period, will be taxable to the beneficiaries, to the extent that the payment includes income or capital gains earned after the death of the holder.
Example: Holder dies with TFSA valued at $80,000. By the time the assets are distributed to the beneficiaries, the value has grown to $82,000. $2,000 will be taxable income to the beneficiaries.
When the TFSA is an annuity contract or a deposit, not a trust, the holder is deemed to have disposed of the annuity contract or deposit immediately before death, thus ending the tax-exempt status.
Canada Revenue Agency (CRA) Resources
RC4466 - Tax-Free Savings Account (TFSA), Guide for Individuals - see Chapter 6 Death of the TFSA HolderFor Issuers - Death of a Tax-Free Savings Account Holder
Tax Tip: If it is possible (provincially regulated), designate your spouse as the successor holder in your TFSA contract, to avoid including the TFSA in assets subject to probate, and to avoid having to change your will.
Previous TFSA Articles
What is Better - TFSA or RRSP?TFSA Contribution Rules and Limits / Leaving Canada
TFSA Investments - qualified, non-qualified, and prohibited
Asset Transfer (Swap) Transactions
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Revised: April 26, 2025