Canada: TFSA Holder Dies

Last Updated: June 17 2019


A Tax-Free Savings Account ("TFSA") is a registered investment account that allows a taxpayer to participate in eligible investments, and withdraw the account's investment growth, capital gain and any other earnings on a tax-free basis. The contributions made to a TFSA account are not deductible, neither are any expenses associated with the set up or maintenance of the account.

This article briefly discusses just how the death of a TFSA-holder impacts the tax treatment of this type of registered account. Furthermore, the article outlines the tax implications of inheriting a TFSA account from deceased spouse or common law partner.

Tax Treatment of TFSA upon Death of the TFSA-Holder: What Happens to the TFSA Account?

Generally, when a taxpayer dies, his or her TFSA ceases to exist. This statement is true for deposit and contract TFSA accounts. So long as the TFSA-holder did not make any excess contributions during his or her lifetime, there are no other tax implications for the deceased. If at the time of death, there are excess TFSA contributions, the outcome is different.

When a taxpayer contributes amounts in excess of his or her TFSA contributions room, the taxpayer will be subject to a special tax. A taxpayer's TFSA contribution room is the maximum amount of funds that a taxpayer can contribute to his or her TFSA at any given point in time. The special tax is equal to 1% of the highest amount of excess TFSA in the month. This special tax continues to apply on monthly basis so long as the excess contributions remains in the taxpayer's TFSA. In fact, if the excess is not removed, the special tax continues to apply up to and including the month of TFSA-holder's death.

Inheriting the Deceased Spouse's or Common Law Partner's TFSA Account: What are the Tax Implications?

A deceased may bequeath a TFSA to his or her surviving spouse or common law partner by naming him or her as either a successor holder or a designated beneficiary. This designation must be made during the deceased lifetime in the TFSA contract or deceased's will.

A surviving spouse's designation, either as a successor holder or a designated beneficiary, has important implications.

First, the type of designation determines how a surviving spouse is taxed upon receipt of a TFSA gift from his or her deceased spouse

Second, type of designation dictates how a gift of TFSA affects the unused TFSA contribution room of the surviving spouse.

So, who can be a successor holder?

A successor holder is the individual who is the spouse or common law partner of a TFSA-holder at the time of his or her death, who is designated as such in the TFSA contract or the deceased's will. When a successor holder is designated, the TFSA account does not cease to exist upon the TFSA-holder's death. Instead, upon death of the holder of the account, the successor holder becomes the new holder of the account. This means that the successor holder becomes the new owner of the account.

It is important to note that not all provinces and territories permit the "successor holder" designation. This label is effective only if the applicable provincial and territorial laws recognize and permit a TFSA-holder to designate his or her spouse or common law partner as such. In the absence of this type of legislation, this designation has no effect. At the time of writing, Ontario is one of the provinces where the designation of a spouse or common law partner as a "successor holder" is recognized.

A successor holder, in essence, becomes the owner of two separate accounts: his or her own TFSA account (if there is one) and the deceased's TFSA account. The successor holder can withdraw funds from the inherited account on a tax-free basis. More importantly, the successor holder's TFSA contribution room is unaffected by the inheritance of the deceased's TFSA account.

When the TFSA-holder has not designated a successor holder but has instead name designated beneficiaries, the deposit or annuity contract ceases as a TFSA upon death of the TFSA-holder. After the holder's death, a new deposit or annuity contract is deemed to continue but is no longer considered a TFSA (i.e. earning in the account and the withdrawals are no longer tax-free).

Unlike a successor holder, a designated beneficiary does not inherit a TFSA account. Instead, he or she receives distributions from the deceased's TFSA. So long as the distributions are equal to or less than the fair market value of the TFSA at the time of the TFSA holder's death, the designated beneficiary receives the distributions on a tax-free basis. In other words, the beneficiary is not required to include the amount of distributions in his or her income. However, any earnings accrued in the account after the date of death that are subsequently distributed must be included in the beneficiary's income in the year of receipt. In other words, the designated beneficiary is required to include these distributions in his or her income in the year of receipt.

A TFSA-holder can name the designated beneficiaries of his or her choice in the TFSA contract or his or her will. Designated beneficiaries can contribute any amounts they receive from a deceased's TFSA to their own TFSA without any tax implications so long as they have TFSA contribution room available. This is so because unlike a successor holder, a designated beneficiary does not inherit a separate TFSA account.

Tax Tips: Even After Death, Excess Contributions Can Give Rise to a Special Tax – A Remedy Be Available

If a TFSA-holder has made excess contributions to his TFSA during his lifetime, and has failed to withdraw the excess amounts upon death, the 1% special tax applies up to and including the month of the TFSA-holder's death. Additional penalties and interest may also apply. Together, the amount of special tax, penalties and interest can be quite significant.

The Income Tax Act provides relief from the 1% special tax and the associated interest and penalties if the entirety of the taxpayer's circumstance meets certain criteria. Consult one of our experienced Canadian tax lawyers to determine your eligibility for this type of relief application.

If you are currently in dispute with the Canada Revenue Agency about your TFSA contributions, our experienced Canadian tax litigators can help you navigate the intricacies of the Income Tax Act and the remedies that may be available to you.

The information is thought to be current to date of posting. Income tax law changes frequently and content may no longer reflect the current state of the law. This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Contact the Author?
Click here to email the Author
In Association with
In Partnership with
Other Canada Advice Centres
Competition and Antitrust
Mergers and Acquisitions
Labour and Employment
More Advice Centers
Useful Resources
Forms available to download for income tax filing in Canada.
Hear David J. Rotfleisch discuss timely and highly topical tax matters during appearances and interviews with specialist publications.
Useful explanatory videos of income tax matters.
The following questions and answers are based on the proposed measures that were announced on December 7, 2015.
The official Government website of the CRA.
This guide is for any person who deals with the Canada Revenue Agency (CRA). The guide gives you information on the 16 rights set out in the Taxpayer Bill of Rights and explains what you can do if you believe that the CRA has not respected your rights.
The Office of the Taxpayers' Ombudsman (OTO) works to enhance the Canada Revenue Agency's (CRA) accountability in its service to, and treatment of, taxpayers and benefit recipients through independent and impartial reviews of service-related complaints and systemic issues.
Ontario personal income tax is an annual tax collected from individuals who are Ontario residents on the last day of the tax year or have income earned in Ontario for the tax year.
The following documents provide instructions for filing your 2015 income tax return.
If you earned income in B.C. or operated a Corporation with a permanent establishment in B.C. last year you need to file an income tax return. Find out when you need to file your income tax return, and if any tax credits or rebates apply to you.
Generally, a corporation must file an Alberta corporate income tax return (AT1) for each taxation year during which it has a permanent establishment in Alberta.
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions