How Is a TFSA Valued at Date of Death for the CRA in Canada?

If you are the executor, one of the first TFSA questions is which balance to use. The balance on the day of death and the amount eventually paid out are often different, and the difference can matter for tax.

This article explains how the CRA frames the date-of-death value, why later growth is treated differently, and what an executor generally needs to gather.

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

What the date-of-death value means

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. For a TFSA, this is the figure the CRA uses as the tax-free ceiling: beneficiaries generally pay no tax on amounts up to the TFSA's fair market value at the date of death, and that amount passes tax-free with no reporting required for it.

For a simple account holding cash or a savings product, the date-of-death balance is usually easy to read from a statement. For investments that fluctuate, the value on the specific day matters, so ask the issuer to confirm it in writing.

Why the payout can be different

Settling an estate takes time, and the account may earn interest or gain value in the meantime. Earnings made after the date of death and before the estate is settled are generally taxable, and the tax-free part is limited to the fair market value at death. There is an exception: starting January 1, 2026, a surviving spouse or common-law partner who receives TFSA payments as a beneficiary may be able to designate earnings accrued after death, up to the end of the rollover period, as exempt contributions.

The rules also treat the account as ending its TFSA life in some cases. A deposit that stops being a TFSA is deemed disposed of at fair market value immediately before that time, and the same deemed disposition applies to a trust that stops being a TFSA. Either way, the tax-free part is measured against the value at death, while earnings after death are handled separately.

• Date-of-death value: the figure the tax-free amount is measured against.
• Payout value: may include post-death earnings, which can be taxable.
• Difference between the two: the part to review with the slips you receive.

How the type of account changes the picture

If a trust TFSA still exists after the exempt period, it becomes a taxable trust and must file a T3 return every tax year it continues. The trust's first taxable year after the exempt period includes post-death income or gains not paid out during the exempt period.

Excess amounts and special situations

If the deceased had an excess TFSA 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. An excess can also block an exempt contribution by a surviving spouse.

If a qualified donee is named as beneficiary, funds generally must be transferred within 36 months of death, and the executor may then ask the CRA to amend the deceased's return to claim the donation credit. How the estate itself is taxed when assets are directed to it depends on the facts, so confirm it with a lawyer or accountant.

What an executor should do next

• Find the TFSA contract and the will to see who, if anyone, was named.
• Ask each issuer for a written statement of the value at the date of death.
• Ask what the account earned after death and what was paid out, and to whom.
• Check whether the deceased may have had an excess TFSA amount, which affects Form RC243.
• Keep all slips and statements together with the estate records.
• Get advice from a lawyer or accountant if the account was held in trust or a charity was named.

Frequently asked questions