How to Make an Exempt TFSA Contribution After a Death in Canada

If your spouse or common-law partner died and you were named as a beneficiary of their TFSA rather than as successor holder, you receive the money, not the account. You may want to put those funds into your own TFSA without using up your room.

The tool for this is called an exempt contribution. It has firm conditions and a short filing window, so the steps matter. This article is general information; a lawyer or accountant can confirm how it applies to you.

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

What an exempt contribution is

A survivor who receives TFSA payments as a beneficiary can contribute them to their own TFSA as an exempt contribution. It does not affect their own available contribution room.

A survivor is someone who was the holder's spouse or common-law partner immediately before the death. A common-law partner is a person who is not your spouse, lives with you in a conjugal relationship and meets a further condition, such as 12 continuous months together or being the parent of your child.

This is different from being a successor holder, where the account itself continues and no payment is considered received.

Whether you are a beneficiary depends on what the TFSA contract or the will says. Anyone other than a successor holder named in the contract or will, such as family, other people or organizations, is a designated beneficiary, who receives the account's value rather than taking over the account. If no successor holder or beneficiary is named, the TFSA assets are directed to the deceased holder's estate and the will governs distribution.

The conditions you must meet

Fair market value means the highest price, expressed in money, obtainable in an open and unrestricted market between informed, prudent parties dealing at arm's length, neither under compulsion to buy or sell. Beneficiaries generally pay no tax on amounts up to the TFSA's fair market value at the date of death. Earnings made after the date of death and before the estate is settled are generally taxable, because the tax-free part is limited to the fair market value at death, although earnings accrued up to the end of the rollover period can now be designated as exempt contributions, as described below.

Starting January 1, 2026, earnings accrued in a TFSA after the holder's death, up to the end of the rollover period, can be designated as exempt contributions. This change is recent, so check the CRA's current wording or ask a professional.

Quebec does not recognize successor holder designations. In Quebec, a surviving spouse or common-law partner may still contribute amounts received to their own TFSA without affecting unused room, if the contribution is made by December 31 of the year following death and Form RC240 is filed within 30 days.

When you cannot use it

• If the deceased's TFSA had an excess TFSA amount, the exempt amount is limited to nil or a greater amount the Minister allows.
• No exempt contribution is possible if payments are received by more than one survivor.
• A non-survivor beneficiary, such as a child, may contribute received amounts to their own TFSA only if they have available room, and cannot designate any amount as exempt. Over-contributing is taxed at 1% per month while the excess remains.

If you are unsure whether any of these situations applies to you, it is worth confirming with a lawyer or accountant before you contribute.

Steps to follow

• Confirm with the issuer that you are receiving payments as a beneficiary, not as successor holder.
• Ask the issuer for the TFSA's value at the date of death, since the exempt amount cannot be more than its fair market value at death.
• Check whether the deceased had an excess amount, since that limits the exempt contribution to nil or a greater amount the Minister allows.
• Contribute to your own TFSA by December 31 of the year following death.
• Send Form RC240 (Designation of an Exempt Contribution – TFSA) to the CRA within 30 days of the contribution.
• Keep copies of the form, issuer statements and contribution receipts.

What to do next

Start by working out the dates. Mark the date of each contribution, then count 30 days for the form. If you are close to the end of the rollover period, or if the CRA's later-date allowance might be needed, get advice early. A lawyer or accountant can also help if several people are receiving payments or the executor is unsure whether there was an excess amount.

Looking ahead for your own planning, a TFSA holder who wants to change or set a designation contacts their TFSA issuer.

Frequently asked questions