What Happens to Your TFSA When You Die in Canada?

What happens to a TFSA after its holder dies depends on who the holder named in the TFSA contract or will (a successor holder, a beneficiary or no one), along with the type of TFSA and when the money is paid out. A spouse or common-law partner named as successor holder becomes the new holder of the same account, and it stays sheltered from tax. A designated beneficiary receives a payment: the value on the date of death is tax-free, but earnings after the death are taxable. If no one is named, the TFSA goes to the estate and is distributed under the will. The rest of the TFSA guides are on the TFSA hub. To change or name a successor holder or beneficiary, see how to change a TFSA beneficiary.

Who decides what happens to a TFSA?

Who receives a TFSA is decided by the designations in the TFSA contract, the terms of the will (if there is one) and the succession law of the holder’s province or territory. A successor holder or a beneficiary can be named in either the TFSA contract or the will. To change a beneficiary designation made in the past, the CRA says to contact the TFSA issuer; see how to change it below.

What happens if your spouse is the successor holder?

Only a spouse or common-law partner can be a successor holder.

• Only your spouse or common-law partner at the time of death can be the successor holder, named in the TFSA contract or in your will.
• The successor holder becomes the new holder of the same account immediately on the holder's death.
• The account's value at death and the income it earns afterwards stay sheltered from tax, and no exempt-contribution form (RC240) is needed.
• Becoming successor holder does not use the successor's own contribution room (unless the deceased's TFSA had an excess), and the deceased's unused room does not pass to them.
• The successor holder needs a valid Social Insurance Number or an individual tax number (ITN).
• Quebec does not recognize successor holder designations for TFSAs, except for TFSA annuity contracts.

If the successor holder already has a TFSA, they can ask the issuer to transfer the inherited account directly into their own and combine the two, which doesn’t affect their contribution room. In the CRA’s own example, a TFSA worth $10,000 on the date of death earns another $200 after the date of death, and neither amount is taxable to the successor holder.

What happens if you name a beneficiary?

• The amount received is tax-free up to the TFSA's fair market value at the date of death.
• Earnings after the date of death are taxable to the beneficiary.
• A spouse or common-law partner named as beneficiary may be able to contribute the payment to their own TFSA as an exempt contribution, which has its own conditions.
• A spouse or partner can instead be named successor holder and keep the account.
• Quebec does not recognize a designated beneficiary on a TFSA that is a deposit or an arrangement in trust; TFSA annuity contracts are the exception.

A designated beneficiary can be a spouse or common-law partner who isn’t named successor holder, a family member, another person or an organization. How earnings after the date of death and before the estate is settled are taxed depends on the type of TFSA:

• A deposit or an annuity contract with no successor holder stops existing when the holder dies, and all growth after the death is taxable to the beneficiary.
• A trust arrangement with no successor holder carries on and stays non-taxable until the end of the exempt period, which ends at the end of the first calendar year that begins after the death, or earlier if the trust ends. Income earned in that period and paid out is taxable to the beneficiaries, and is reported in box 134 of a T4A slip. A trust still holding money after the exempt period is taxable from then on.

The TFSA issuer or the deceased’s legal representative can say which type of TFSA it is.

Can a surviving spouse put the money in their own TFSA?

• A spouse or common-law partner named as beneficiary, or a surviving spouse or common-law partner in Quebec, can contribute all or part of the payment to their own TFSA and designate it as an exempt contribution, which doesn't use their own contribution room.
• The survivor receives the payment and contributes it during the rollover period, which runs from the death to the end of the calendar year that follows the year of death.
• The survivor sends Form RC240 to the CRA within 30 days of making the contribution, or later if the CRA allows.
• The exempt amount can't be more than the payment received, less any other contributions already designated against that payment.
• The contribution can't be exempt if the deceased's TFSA held an excess amount or if payments went to more than one survivor.
• Since January 1, 2026, earnings that build up in the TFSA after the death, up to the end of the rollover period, can also be designated as an exempt contribution.

The two sources word the limit differently: the CRA’s list of conditions says an exempt contribution can’t be more than the TFSA’s value at death, while the Income Tax Act’s definition limits it by the payment received. Form RC240 works out the maximum amount that can be designated.

What about children, other people and charities?

A beneficiary who isn’t a surviving spouse or partner can’t make an exempt contribution, and can put what they receive into their own TFSA if they have contribution room. An over-contribution is taxed at 1% of the highest excess amount in each month, for every month the excess stays in the account, with no buffer. The TFSA penalty calculator works out that tax month by month from your room, contributions and withdrawals.

Registered charities are among the qualified donees that can be named. A qualified donee named as beneficiary generally has to receive the funds within 36 months of the death, and the executor can then ask the CRA to change the year-of-death return to claim the donation tax credit.

What if no one is named?

If no successor holder or beneficiary is named in the TFSA contract or the will, the TFSA’s property goes to the estate and is distributed under the will. For what settling an estate can cost, see probate fees by province.

How do you change or name a successor holder or beneficiary?

A spouse or common-law partner can be named either successor holder or beneficiary.

A TFSA issuer’s designation form can name a successor holder, one or more beneficiaries with percentage shares, or both. Two issuers’ forms say a new designation revokes the earlier ones for the account the form names. A will can also name a successor holder or beneficiary, and a will that names a successor holder has to state that they hold all the same rights as the holder. The guide to beneficiary designations covers wills and designation forms together, and other accounts.

When the designation on file may no longer fit:

• A new spouse or partner: only the holder’s spouse or common-law partner immediately before death can become successor holder.
• Separation or divorce: one issuer’s form says a successor holder appointment becomes ineffective on divorce or the breakdown of a common-law relationship, but a beneficiary designation is not revoked or changed automatically. Dividing the TFSA itself is a separate step.
• A new child: children can be named as beneficiaries; for a minor, see minors as beneficiaries.
• The person named died first: one issuer’s form pays that share to the estate, another’s to the remaining beneficiaries; see also when a TFSA goes to the estate.

What if the TFSA was over-contributed?

An excess amount is taxed to the deceased at 1% a month for each month it stays in the account, up to and including the month of death. The deceased’s legal representative files a TFSA return (Form RC243) and Schedule A for that period. A successor holder is treated as contributing the excess to their own TFSA at the start of the month after the death, and if that creates an excess in their own account, it’s taxed at 1% per month for as long as the excess stays in it.

Quebec and non-residents

Quebec doesn’t recognize a successor holder designation on a TFSA; TFSA annuity contracts are the exception. A surviving spouse or common-law partner in Quebec can still make an exempt contribution.

A beneficiary who isn’t a resident of Canada receives a payment based on the TFSA’s value on the date of death, and that amount isn’t taxable in Canada. Amounts paid during the exempt period above that value are subject to non-resident withholding tax. A non-resident successor holder can withdraw at any time but can’t contribute while non-resident. How TFSA room works while you’re non-resident is covered in how much TFSA room you have.

How is this different from an RRSP?

When the holder of an RRSP that hasn’t started paying a retirement income dies, the CRA treats them as having received the RRSP’s full value immediately before death, and that amount goes on their return for the year of death. One exception is a spouse or common-law partner named sole beneficiary by December 31 of the year following the year of death, when the whole RRSP is transferred directly into their own RRSP, RRIF or another registered plan. A TFSA’s value at death, by contrast, isn’t taxed whether it goes to a successor holder or a designated beneficiary. What happens to an RRSP when you die covers the RRSP side, including financially dependent children and grandchildren.

Related Resources

• TFSA Guide
• Funding a Spouse’s TFSA
• Beneficiary Designations Across Your Accounts
• RRSP Beneficiary Rules
• Estate Planning Canada
• Probate Fees by Province
• Spousal RRSP Guide