This term “successor holder” may be new for many among you, but it’s an important one to understand, especially if you designated someone to be the beneficiary of your TFSA. (This doesn’t apply to Quebecers.)
The following points are from the successor holder article on the CRA website:
- A successor holder is the survivor of the deceased who is named as the new holder of the TFSA in either the TFSA contract or in the will of the deceased holder.
- The successor holder immediately becomes the new holder and assumes ownership of the TFSA upon the death of the deceased holder. The value of the TFSA on the date of death and any income earned after that date are still sheltered from tax under the successor holder.
- A survivor who is designated as a successor holder must have either a valid social insurance number (SIN) or an individual tax number (ITN).
- The successor holder may be named in the will of the deceased holder (instead of in the TFSA contract) if it states that the successor holds all the same rights as the original holder. This includes the right to cancel or change any beneficiary designation the deceased holder had chosen for the account or its assets.
- If the successor holder already has their own TFSA, they would be considered to hold two separate TFSAs.
- The successor holder’s own available TFSA contribution room is not affected by becoming a successor holder as long as there is no excess amount in the deceased holder’s TFSA.
- If the successor holder has multiple TFSAs, their available contribution room now applies to all accounts collectively. The successor holder does not gain the deceased holder’s unused contribution room, if there is any.
- After taking over ownership of the deceased holder’s TFSA, the successor holder can make tax-free withdrawals from that account. They can also make new contributions to that account if they have available contribution room.
- The successor holder may ask the TFSA issuer to directly transfer some or all of the value from one TFSA to the other and consolidate the accounts. This would be a qualifying transfer and would not affect their available TFSA contribution room.
To learn more about the tax implications for the successor holder, including fines related to excess contributions, click here to go to the article on the CRA website.
