Tax-Free Savings Account Should Be Included In Your Estate Planning!

Estate Planning Should Include Your Tax-Free Savings Account 

Estate Planning is definitely something we should all have, but it is not always something we like to think about. 

Lee Anne Davies head of Retirement Strategies, RBC says, “By focusing on your long term priorities, you and your spouse can determine when and how well you retire. While planning together can be challenging, it’s fundamental to keeping a long term plan on track. A professional financial advisor can help build a plan that includes your shared and individual goals.” 

The Tax Free Savings Account (TFSA) became available in January 2009 to any Canadian resident aged 18 years or older, who has a valid Social Insurance Number (SIN). They can contribute up to $5,000.00 a year and any unused amounts can be carried over to subsequent years. If you look on your T1 notice of assessment you will find your unused contribution room. It is also on your online “My Account” service from the Canada Revenue Agency if you use it. 

In every province with the exception of Quebec when a spouse or common-law partner has been chosen the successor holder of a TFSA, that person will take over ownership of the TFSA at the date of the original owner’s death. No tax is usually paid on the value of the TFSA or on the gain or income on the TFSA by the successor after the date of death. 

If there is no successor holder at the time of death of the original TFSA holder then the holder will be considered to have been given an amount equal to the fair market value (FMV) of all the property held in the TFSA at the time of death. The TFSA will no longer be considered a TFSA once the holder dies. All earnings that are accumulated after death are taxable to the beneficiaries and must be included in their income for that year.

For the complete list of the rights and responsibilities of a TFSA beneficiaries please visit their website. It’s also good to plan ahead and know what is required before you start planning your estate.

This article was adapted from the article in an Retail Pages Magazine.