Inherited My Husband’s TFSA: Does It Change My Contribution Room?

Rolina, based on what you described, it’s likely you did not overcontribute, but it’s wise to confirm through the Canada Revenue Agency’s My Account service if you have any doubt. If you don’t already use CRA My Account, you can register for it at no cost. When a deceased spouse’s TFSA is transferred into a surviving spouse’s TFSA under the exempt rollover rules, that transfer does not reduce the surviving spouse’s available TFSA contribution room. In practical terms, the money moved from your husband’s TFSA was treated as an exempt contribution and should not have affected your personal lifetime contribution limit.

How the account was transferred matters because TFSAs allow different estate designations: beneficiary, successor holder, or estate. Each has different tax and rollover consequences.

A beneficiary receives the TFSA’s value at the date of death, and that amount is generally tax-free. However, any investment growth that occurs after the owner’s death but before the beneficiary receives the funds can be taxable. Naming a beneficiary avoids probate and can speed access, but a beneficiary designation by itself does not automatically permit an exempt rollover into the surviving spouse’s TFSA.

If the estate is named as the TFSA’s recipient, the funds pass through the estate and may be subject to probate fees. Like the beneficiary option, any post-death growth is potentially taxable. An exempt rollover into a surviving spouse’s TFSA is still possible from an estate account, but it requires additional paperwork and must meet strict deadlines.

How to enable a TFSA rollover after the fact

If the TFSA was left to a beneficiary or to the estate rather than to a successor holder, you can still arrange an exempt rollover by completing CRA form RC240. There are clear deadlines you must meet: the funds must be transferred into the surviving spouse’s TFSA no later than December 31 of the year following the year of death, and you must file form RC240 within 30 days after making that rollover contribution. Missing these deadlines can create complications, so attention to timing is important.

To avoid that extra paperwork, many couples name each other as successor holders of their TFSAs. A successor holder designation allows the surviving spouse to assume ownership of the TFSA and permits an automatic exempt rollover of the account’s value into the surviving spouse’s TFSA. Note that any investment growth that occurs after the account owner’s death may not be eligible for exempt rollover treatment and can have different tax consequences, depending on the designation and timing.

Why this matters: TFSA contribution room has increased significantly since TFSAs were introduced. Rather than the original $5,000 annual amount in the first year, the current cumulative lifetime contribution limit has grown — in your note you referenced a total of $102,000 — and that principal plus any investment growth can remain sheltered from tax and be preserved for a surviving spouse if handled correctly.

How a deathbed contribution can reduce future taxes

You and your husband acted prudently by maximizing TFSA contributions while you could. For couples where one spouse hasn’t used all their TFSA room, a “deathbed contribution” can be an effective strategy if death is imminent. This means contributing additional funds to a spouse’s TFSA shortly before death so the surviving spouse will inherit a larger tax-sheltered balance. That extra room may be useful later for events such as a house sale, receiving an inheritance, or transferring funds from a registered account into a TFSA.

If cash is not available, it’s possible for a spouse to top up the other spouse’s TFSA from their own TFSA or to use a short-term loan that the deceased spouse’s estate or the surviving spouse repays after the exempt rollover. The key is ensuring the rollover is completed under the CRA rules so the funds retain their tax-sheltered status for the surviving spouse.

In your situation, because you said you were named as a beneficiary rather than as a successor holder, the exempt rollover would have required RC240 and the timely transfer I described. Since you haven’t received any notices from the CRA about overcontributions in the past five years, it’s likely the rollover was handled properly. Still, it’s a good idea to log into CRA My Account to confirm your TFSA contribution history and ensure no inadvertent overcontribution occurred.

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