What If a Spouse Is Not Named Successor Holder on a TFSA in Canada?

Many couples assume the surviving partner will simply keep the TFSA. That only happens automatically if the partner was named as successor holder. If the paperwork names them as an ordinary beneficiary, or names no one, the outcome is different.

This article explains the difference, where the money goes when a spouse is not the successor holder, and the exempt contribution option that can still let a survivor move the funds back into a TFSA.

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

Successor holder versus beneficiary

A successor holder is the surviving spouse or common-law partner named in the TFSA contract or in the will, and on the holder's death they immediately become the new holder and take ownership of the TFSA. A will designation must state that the successor holds all the same rights as the original holder, including the right to change beneficiary designations.

Anyone other than a named successor holder, including family, other people and organizations, is a designated beneficiary. A beneficiary receives the account's value rather than taking over the account. If neither a successor holder nor a beneficiary is named, the TFSA assets are directed to the deceased holder's estate and the will governs distribution.

Who counts as a partner matters too. A survivor is an individual who is, immediately before the holder's death, the holder's spouse or common-law partner. A common-law partner is a person who is not your spouse, with whom you are living in a conjugal relationship and who meets a further condition, such as having lived with you for at least 12 continuous months or being the parent of your child.

What changes when you are not the successor holder

For a deposit or annuity TFSA without a successor holder, the account stops being a TFSA on the holder's death, and all earnings after death are taxable to the beneficiary.

The exempt contribution option for a survivor

A survivor who receives TFSA payments as a beneficiary can contribute them to their own TFSA as an exempt contribution that does not affect their own available contribution room. The conditions are that the amount is received and contributed during the rollover period, which runs from death to the end of the calendar year after the year of death, and that the total is not more than the TFSA's fair market value at death.

The survivor sends Form RC240 (Designation of an Exempt Contribution – TFSA) to the CRA within 30 days of making the contribution, unless the CRA allows a later date. Starting January 1, 2026, earnings accrued after death, up to the end of the rollover period, can also be designated as exempt contributions.

When the option is not available

• If the deceased's TFSA had an excess TFSA amount, the exempt contribution is limited to nil unless the Minister allows a greater amount, and no exempt contribution is possible if payments are received by more than one survivor.
• A non-survivor beneficiary, such as a child, may contribute 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.
• Quebec does not recognize successor holder designations for TFSAs, so a surviving spouse there cannot rely on a successor holder designation to take over the account.

Quebec is not a case where the exempt contribution option is lost. A Quebec 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.

If the deceased had an excess amount, it is taxable to the deceased at 1% per month for each month it stays in the account, up to and including the month of death, and the legal representative files Form RC243 and Schedule A (RC243-SCH-A).

What to do next

• Get a copy of the TFSA contract and the will to see who, if anyone, was named.
• Ask the issuer how it recorded the designation, since the holder deals with the issuer to set or change one.
• Note the date of death and mark the end of the rollover period, December 31 of the following year.
• Ask the issuer for the value at the date of death.
• Confirm whether there was an excess TFSA amount before planning a contribution.
• Talk to a lawyer or accountant before moving funds, especially if the estate or several survivors are involved.

Frequently asked questions