What Happens to the TFSA of Someone Who Died, and Is It Taxable in Canada?

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

The fair market value of a TFSA at death is generally not taxable to beneficiaries, but growth after death can be. The holder is considered to have received that value immediately before death, but the deceased reports no TFSA income on the final or optional returns. For deposit or annuity TFSAs, all earnings after death are taxable to the beneficiary, and for trust TFSAs, amounts above the value at death are taxable.

A successor holder, meaning a surviving spouse or common-law partner named in the TFSA contract or will, simply becomes the new holder, and the account keeps its TFSA status. The value at death and later income are not taxable to them, but they do not inherit the deceased's unused contribution room.

A survivor who is not the successor holder can contribute amounts received to their own TFSA during the rollover period without using their contribution room, up to the value at death, and must send Form RC240 to the CRA within 30 days of the contribution, or later if the CRA permits. Starting January 1, 2026, earnings accrued after death up to the end of the rollover period may be designated as an exempt contribution.