What is the difference between a TFSA beneficiary and a TFSA successor holder?

Both designations determine where your TFSA goes on death, but they work very differently and produce different tax outcomes.

A "successor holder" can only be named for a spouse or common-law partner. When you name your spouse as successor holder, the TFSA simply becomes their own TFSA on your death — it is not transferred to them, it becomes them. The account continues to grow tax-free in its entirety, and your spouse does not use up any of their own TFSA contribution room to accommodate it. This is the most tax-efficient outcome for a married couple.

A "beneficiary" is a broader category — you can name a spouse, children, anyone, or your estate. On death, the TFSA pays its fair market value at the date of death to the beneficiary income-tax-free. However, any growth earned inside the account from the date of death until the funds are actually paid out may be taxable. The beneficiary also does not gain additional TFSA room as a result.

If you are married or in a common-law partnership, naming your spouse or partner as successor holder (not just as beneficiary) is generally the preferred choice.