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TFSAs – Important technical info

What's the difference between a survivor holder (also known as successor holder) and beneficiary?

Canadian pharmacy owners and pharmacists in general should be aware of an important wrinkle associated with Tax-Free Savings Account administration.

The TFSA is a savings tool created to help Canadians accumulate tax-free savings for various future needs. However, there has been some confusion over the years over what occurs when the holder of a TFSA dies. Notwithstanding Quebec, all provinces permit a TFSA holder to designate a successor holder or beneficiary for their TFSA. This allows the assets within a TFSA to be transferred directly to either the successor holder or beneficiary and save probate fees or costs associated with the assets flowing through the estate.

Successor Holder

This person must be either a spouse or common law partner. If a TFSA holder names their spouse or common law partner the successor holder, upon the death of the TFSA holder, the spouse becomes the new holder and the tax-exempt status of the TFSA is maintained, without affecting the contribution room of the spouse. The deceased’s unused contribution room is lost, but the successor holder’s unused contribution room is not impacted. The successor holder can maintain two separate TFSA accounts afterwards or consolidate the deceased spouse or partner’s TFSA with their own. Appointing a successor holder ensures that an account holder’s surviving spouse or partner will take possession of the funds without any tax liability incurred.


If a TFSA holder designates a spouse or partner as a beneficiary instead of successor holder, they have until the end the calendar year following the year that begins following the time of death to contribute the amounts received from the deceased person’s TFSA into their own TFSA without affecting their contribution room. This is known as an “exempt contribution”. As part of this process, they must file a CRA form RC240 within 30 days of the contribution. The maximum amount for the transfer corresponds to the FMV at the time of death. The difference between the FMV at transfer and the FMV at death will be taxed in the hands of the beneficiary, so any gains that occur after death are taxed.

If someone other than a spouse or partner is designated as the beneficiary, the account ceases to be a TFSA after death. Any income earned on the TFSA assets after death will be taxable as ordinary income for the beneficiary. A beneficiary other than a spouse or partner can only contribute the proceeds to their own TFSA if they have enough contribution room.

Designating a successor holder is the most tax efficient way to transfer assets from a TFSA to the holder’s spouse or common law partner upon death. It allows for the avoidance of probate fees and ensures the assets remain tax sheltered throughout the transfer process and into the future under the successor holder’s control. With the beneficiary designation, the assets are protected from probate fees, but the process is not as tax efficient.

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