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Like other registered accounts, the owner of a TFSA can designate a beneficiary or beneficiaries within the account. A major advantage to designating a beneficiary is that the account will pass directly to the named beneficiary outside of the Estate, so Estate Administration Tax (‘probate tax’) will not be payable on the value of the account.

However, many people do not know that there is a second type of designation that the owner of a TFSA can make: a “successor holder” designation. Understanding the difference between a successor holder and beneficiary is important to creating an efficient estate plan.

Designating a Successor Holder

The owner of a TFSA can designate their spouse or common law partner as the successor holder of their TFSA. This designation can be made in the TFSA contract itself or in a Will.

On the death of the owner, the TFSA continues in the hands of the successor holder. Any income or gains earned in the TFSA continue to accrue on a tax-free basis in the TFSA, and the successor holder may make tax-free withdrawals from the TFSA. The result is a smooth transition from the owner to the successor holder with no intervening tax events.

The successor holder may combine the deceased’s TFSA into their own TFSA. This transfer would not affect the successor holder’s TFSA contribution room.  Alternatively, the successor holder may continue the deceased’s TFSA as a separate account. In this case, the successor holder’s unused contribution room is not affected by their having assumed ownership of the deceased’s TFSA. However, new deposits in the deceased’s TFSA are subject to the successor holder’s own contribution room.

Designating a Beneficiary

TFSA account holders can also designate a beneficiary or beneficiaries to their TFSAs. Income earned in the TFSA and gains in the TFSA up to the date of death are not taxed in the hands of the beneficiary/ies. However, any income earned in the TFSA and any gains in the TFSA after the date of death and before the TFSA is distributed are taxable to the beneficiary/ies.

If a spouse or common law partner (a “survivor”) is designated as a beneficiary, that survivor can designate all or part of the deceased’s TFSA as a ‘survivor payment’ to their own TFSA, without affecting their own TFSA contribution room. This survivor payment must occur before December 31 of the year following the year of death. The surviving spouse or common law partner must also file a form with CRA designating the transfer as an ‘exempt contribution’.


All things being equal, it is preferable to name a spouse or common law partner as the successor holder to a TFSA rather than the beneficiary. Depending on the financial institution, it may be possible to name both a successor holder and a contingent beneficiary (in the event that the successor holder does not survive the TFSA owner).



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