Is the Growth in a TFSA Taxable After the Holder Dies in Canada?

This answer covers Canadian federal tax law, which applies in every province.

Growth earned after the date of death is generally taxable, because the tax-free part is limited to the TFSA's fair market value at death. Beneficiaries generally pay no tax on amounts up to that value, and no reporting is required for that amount. Fair market value is the highest price obtainable in an open market between informed, prudent parties dealing at arm's length.

A spouse or common-law partner named as successor holder takes over the account, which continues as a TFSA, though Quebec does not recognize this designation. For a deposit or annuity TFSA without a successor holder, the account stops being a TFSA on death, and all earnings after death are taxable to the beneficiary, with interest reported on a T5. For a trust-governed TFSA, the trust keeps limited TFSA treatment during the exempt period, which ends at the earlier of the end of the year following the year of death or when the trust ceases to exist.

From January 1, 2026, a survivor may designate post-death earnings to the end of the rollover period as exempt contributions, unless the deceased had an excess or several survivors receive payments. A lawyer or accountant can confirm how this applies to your situation.