Inherited a Spouse's TFSA as Beneficiary? Form RC240 in Canada

When your spouse or common-law partner dies, their TFSA does not always pass to you as the new account holder. If you were named as a beneficiary instead of a successor holder, you receive the account's value rather than taking over the account. The tax-free savings can still be kept sheltered, but only if you follow specific steps and meet specific deadlines.

This article explains the exempt contribution, which is the route that lets a survivor put inherited TFSA money into their own TFSA without using up their own contribution room. It covers who qualifies, the time limits, Form RC240, and the situations where the route is closed. It is general information, and a lawyer or accountant can confirm how it applies to your estate.

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

Successor holder or beneficiary: why it matters

A successor holder is the surviving spouse or common-law partner named in the TFSA contract or in the will. On the holder's death they immediately become the new holder and take ownership of the TFSA. The deceased is not considered to receive an amount from the account, so it continues as a TFSA with its tax-free status intact.

A beneficiary is different. Anyone other than a successor holder named in the contract or will 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 go to the deceased's estate and the will governs distribution.

The CRA notes that Quebec does not recognize the successor holder designation for TFSAs, though a Quebec surviving spouse can still make an exempt contribution.

Who counts as a survivor

Under section 146.2(1) of the Income Tax Act, 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.

The conditions for an exempt contribution

A survivor who receives TFSA payments as a beneficiary can contribute them to their own TFSA as an exempt contribution, which does not affect their own available contribution room. Two conditions apply: the money must be received and contributed during the rollover period, and the total cannot be more than the TFSA's fair market value at death.

• The rollover period runs from the date of death to the end of the calendar year after the year of death, which means December 31 of the year following death.
• The cap is the TFSA's fair market value at death. Fair market value is 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.
• Starting January 1, 2026, earnings accrued in the TFSA after death, up to the end of the rollover period, can also be designated as exempt contributions.

The 2026 change is recent, so it is worth confirming the current CRA wording or asking an accountant how it applies to your timing.

Filing Form RC240 on time

You send 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. The Income Tax Act definition of exempt contribution in section 207.01(1) also requires the designation within 30 days.

The 30 days run from the contribution, not from the date of death. Keep the issuer's records showing when the money was received and when you deposited it into your own TFSA.

If you live in Quebec, where successor holder designations are not recognized, a surviving spouse or common-law partner may contribute the amounts received to their own TFSA without affecting unused room, if contributed by December 31 of the year following death and Form RC240 is filed within 30 days.

When no exempt contribution is possible

The route is closed in two situations: the deceased's TFSA had an excess TFSA amount, or payments are received by more than one survivor. Where there was an excess, section 207.01(1) limits the amount to nil or a greater amount the Minister allows.

A non-survivor beneficiary, such as a child, is treated differently. They may contribute received amounts to their own TFSA only if they have available room, and they cannot designate any amount as exempt. Over-contributing is taxed at 1% per month while the excess remains.

What to do next

• Find out from the TFSA issuer whether you were named successor holder or beneficiary.
• Ask for the fair market value of the account at the date of death.
• Note the December 31 deadline for receiving and contributing the money.
• Check whether the deceased had an excess TFSA amount, since that closes the exempt route.
• Make the contribution to your own TFSA, then file Form RC240 within 30 days.
• Confirm whether other survivors are receiving payments, since that also closes the route.

Earnings made after death and before the estate is settled are generally taxable, and the tax-free part is limited to the fair market value at death. The exception is that, starting January 1, 2026, earnings accrued after death up to the end of the rollover period can be designated as exempt contributions. For that reason, and given how recent the change is, speak with a lawyer or accountant before the deadlines are close.

Frequently asked questions