Does a TFSA Have to Be Reported on the Final Return in Canada?

A TFSA is usually tax-free while the holder is alive, so many families assume it is also ignored at death. The real answer has a few parts, and the timing of growth after death matters.

This article explains what happens to a TFSA on the final return, how successor holders and other beneficiaries are treated, and how an exempt contribution works.

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

The final return and the TFSA

The holder is considered to have received, immediately before death, an amount equal to the fair market value of the TFSA property. However, the deceased reports no TFSA income on the final or optional returns.

Income that investments held in a TFSA before death earn after death is a different matter. The estate reports earnings from those investments on the T3 return and not on the final T1.

Tax treatment for beneficiaries

The fair market value at death is generally not taxable to beneficiaries. After death, the treatment depends on the type of TFSA.

• For a deposit or annuity TFSA, all earnings after death are taxable to the beneficiary.
• For a trust TFSA, amounts above the fair market value at death are taxable, and they are shown in box 134 of the T4A.

Because the type of account matters, check the account agreement or ask the financial institution which kind of TFSA it is.

Successor holders

A successor holder is a surviving spouse or common-law partner named in the TFSA contract or will. They simply become the new holder, the account keeps its TFSA status, and the fair market value at death and later income are not taxable to them.

There is one limit. A successor holder does not inherit the deceased's unused contribution room.

Exempt contributions for other survivors

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. The total cannot exceed the fair market value at death.

Form RC240 must be sent to the CRA within 30 days of making the contribution, or later if the CRA permits. Starting January 1, 2026, earnings accrued in a TFSA after the holder's death up to the end of the rollover period may be designated as an exempt contribution.

In Québec, the survivor must make the contribution no later than December 31 of the year following the year of death and file RC240 within 30 days of the contribution. The newer 2026 change is worth confirming against the current RC240 instructions.

What to do next

• Ask the financial institution for the fair market value at the date of death and the TFSA type.
• Check the TFSA contract and the will to see whether a successor holder was named.
• If a survivor is not the successor holder, decide whether to make an exempt contribution and note the 30-day RC240 deadline.
• Keep post-death earnings separate, and report them as the rules require.
• Notify the CRA of the death as soon as possible.

If the estate is large or the account type is unclear, an accountant or lawyer can confirm how the TFSA should be handled.

Frequently asked questions