Are TFSA proceeds received after death taxable to the person who receives them?

For the most part, TFSA proceeds are received tax-free by a named beneficiary. The fair market value of the TFSA at the date of the holder's death is paid to the beneficiary without being included in either the deceased's income or the beneficiary's income. This is one of the key advantages of the TFSA over the RRSP.

However, there is a nuance: if the account earns income (interest, dividends, or capital gains) inside the TFSA between the date of death and the date the account is actually wound up and the proceeds paid out, that post-death growth is taxable to the beneficiary. This is sometimes called the "post-death income" and is reportable by the beneficiary on their personal tax return.

A spouse or common-law partner named as successor holder avoids this issue entirely because the TFSA simply becomes their own TFSA seamlessly — there is no "wind-up" period during which post-death income accumulates.

Prompt administration of the estate tends to minimize post-death income in TFSAs by reducing the time between death and payout.