01 / At a glance
The 60-second version
Bronze — will only
No successor holder, no beneficiary named. Your spouse still gets the money through your will — but only after probate, and it arrives as cash, no longer inside a TFSA.
Silver — beneficiary
Your spouse is named beneficiary. They receive the money directly (no probate), but as cash — the TFSA closes. The RC240 fix can put it back into their TFSA, if they act in time.
"The difference between Bronze and Gold is one designation made while you are alive — and a form, a deadline, and probate avoided for the person you love most."
02 / The three scenarios
What actually happens in each case
First, the two words people mix up. A successor holder can only be your spouse or common-law partner, and they take over the TFSA itself. A beneficiary can be anyone — spouse, child, friend, charity — and they receive a payout while the TFSA closes.[1][3] Now, the three scenarios, ranked:
Successor holder: your spouse becomes the new TFSA holder
When a successor holder is named, your TFSA does not cease to exist. On your death, your spouse immediately becomes the new account holder. The account keeps its full tax-free status, all future growth stays sheltered, and the transfer does not touch your spouse's own contribution room.[2][3] Because the transfer happens directly on the account, it also bypasses probate entirely — no fees, no delays, no estate paperwork standing between your spouse and the money.
The only catch: only a spouse or common-law partner can be a successor holder, and in Quebec this designation is generally not accepted on non-insurance TFSAs — Quebec residents handle it through the will instead.[3]
Beneficiary: your spouse gets the money, but as cash
If your spouse is named as a beneficiary instead of a successor holder, the TFSA account itself closes at your death. The value of the account at the date of death is paid out tax-free, and the payout goes directly to your spouse — no probate, since the designation sits on the account.[1][4] But the money is no longer inside a TFSA. From here on, any growth on it is taxable — unless your spouse uses the RC240 fix in section 03 to put it back into their own TFSA.
Note: a non-spouse beneficiary (child, friend, sibling) can also receive the value at death tax-free, but they cannot use the RC240 fix — they would need their own TFSA contribution room to re-shelter the money.[3]
No designation: the will still works — after probate, as cash
If you named nobody — no successor holder, no beneficiary — but your will says your spouse receives everything, your spouse still gets the TFSA money. The path is just longer: the TFSA falls into your estate, goes through probate, and is distributed under the will.[3][5] And, as with the beneficiary scenario, the money arrives as cash — no longer inside a TFSA account type. The good news: the RC240 fix in section 03 is still available to the surviving spouse, as long as they receive the proceeds as a consequence of your death and meet the deadlines.[1]
| Feature | Successor holder (Gold) | Beneficiary (Silver) | Will only (Bronze) |
|---|---|---|---|
| Who can be named | Spouse / common-law partner only | Anyone | Nobody named |
| TFSA stays open? | Yes — ownership transfers | No — account closes | No — account closes |
| Probate | Bypassed | Bypassed (named on account) | Required |
| Uses survivor's contribution room? | No | No, if RC240 fix is used | No, if RC240 fix is used |
| Form / deadline? | None | RC240 within 30 days of contribution | RC240 within 30 days of contribution |
| Available in Quebec? | No (use will) | No (use will) | Will-based process |
03 / The fix
Scenarios 2 and 3 can be corrected: the RC240 exempt contribution
Here is the part most people do not know: if your spouse ends up in scenario 2 or 3 — beneficiary, or no designation at all — the outcome can still be made to look almost exactly like scenario 1. The tool is the CRA's exempt contribution, designated on Form RC240.[1][4] It works like this:
Step 1 — The money comes out. The deceased's TFSA proceeds are paid to the surviving spouse (directly as beneficiary, or through the estate under the will).
Step 2 — The survivor contributes it to their own TFSA. This must happen during the rollover period: from the date of death until December 31 of the year following the year of death. So if death occurs in 2026, the contribution must be made by December 31, 2027.[1]
Step 3 — File Form RC240 within 30 days. The survivor files CRA Form RC240, Designation of an Exempt Contribution to a Survivor TFSA, with the CRA no later than 30 days after the contribution is made.[1][4] The form itself determines the maximum amount that can be designated as exempt — the TFSA issuer or the estate executor can provide the value at death.
Result — the money is back inside a TFSA, without using the survivor's own contribution room. The contribution is "exempt," meaning it does not consume the survivor's personal TFSA room at all — even if the amount is far larger than their available room.[1]
Two warnings. First, if the contribution is not designated as exempt in time, it counts against the survivor's own room — and contributing beyond available room creates an excess taxed at 1% per month for as long as the excess remains.[6] Second, the exempt contribution is not available if the deceased's TFSA had an excess at death, or if payments were received by more than one survivor.[1]
04 / New for 2026
The fix just got fairer: post-death growth now counts too
Until now, the RC240 fix had a hard limit that quietly punished slow estates. Before January 1, 2026, the exempt contribution was capped at the fair market value of the TFSA on the date of death. Any income earned — or any increase in value — between death and the payout was taxed as ordinary income to the beneficiary, even if it was dividends or capital gains that would otherwise have been taxed more gently.[4][7]
Starting January 1, 2026, that changes. The CRA now states that earnings accrued in a TFSA after the holder's death, up to the end of the rollover period, can also be designated as an exempt contribution.[1] In plain English: if the account keeps growing while the estate is being settled, that growth can now be sheltered too — not just the value on the day of death. Commentators describe this as making the tax treatment effectively equal for a surviving spouse whether they were named successor holder or beneficiary, as long as the deadlines are met.[7]
An illustrative example makes the difference concrete. Say a TFSA is worth $200,000 at death and grows to $220,000 by the time it is paid out:
Before 2026: only $200,000 could be designated as an exempt contribution. The $20,000 of post-death growth was taxable income to the survivor.
From 2026: the $20,000 of post-death earnings (accrued up to the end of the rollover period) can also be designated as exempt — so the full $220,000 can go back into the survivor's TFSA without using their contribution room. Illustrative figures; the RC240 form determines the actual maximum for a given case.
05 / Why Gold still wins
If the fix is this good, why bother with a successor holder?
Because the fix still has friction the Gold path never has. The successor holder route has no form, no 30-day clock, no December 31 deadline, no gap period where the money sits outside any TFSA, and no probate. The RC240 route requires the survivor — often grieving, often dealing with an executor who may be a different person — to coordinate a contribution and a CRA filing inside two separate deadlines.[6] The 2026 change makes the fix fairer, not effortless. If you are married or common-law, naming your spouse as successor holder remains the simplest, safest choice. Think of the RC240 fix as the safety net for the many accounts where the designation was never made — not as a reason to skip making it.
06 / Practical tips
Five things to do (or check) now
- Check your designations today, on every TFSA. Log in to each financial institution and confirm whether a successor holder is named — designations are set per account, not once for all your TFSAs. If your spouse is listed as beneficiary rather than successor holder, switch it: it is usually a single form.
- Name a backup beneficiary too. If you and your spouse pass together, a backup (for example, an adult child) keeps the money flowing outside the estate. A non-spouse beneficiary cannot use the RC240 fix, but they receive the value at death tax-free.[3]
- Tell your executor about the RC240 deadlines. The fix only works if someone acts: contribution by December 31 of the year after death, RC240 filed within 30 days of that contribution. Put a note with your will so the executor and your spouse both know the clock is running.[1]
- Quebec residents: do it in the will. Successor holder and beneficiary designations are generally not accepted on non-insurance TFSAs in Quebec — the will is the vehicle, but the surviving spouse can still use the exempt-contribution process.[3]
- Watch the two disqualifiers. The exempt contribution is unavailable if the deceased's TFSA had an excess at death, or if payments were received by more than one survivor — in those cases, talk to the CRA or a tax professional before contributing.[1][8]
07 / FAQs
Quick answers
What is a TFSA successor holder?
A successor holder is the person — only a spouse or common-law partner can be named — who takes over your TFSA when you die. They become the new holder of the same account. The TFSA stays open, keeps growing tax-free, and the transfer uses none of the survivor's own contribution room. No form, no deadline, no probate.[1][2]
What is the difference between a successor holder and a beneficiary?
A successor holder takes over the TFSA itself — the account continues. A beneficiary receives the money as a payout and the TFSA closes. A beneficiary who is the surviving spouse can put the money back into their own TFSA as an exempt contribution using Form RC240, without using their own contribution room, if they act by December 31 of the year following death and file RC240 within 30 days of the contribution.[1]
What happens if I name nobody at all?
The TFSA falls into your estate, goes through probate, and is distributed under your will (or intestacy rules if there is no will). Your spouse still gets the money if the will says so — but as cash, no longer inside a TFSA. The RC240 fix can still put it back into their TFSA if they receive the proceeds as a consequence of your death and meet both deadlines.[1][5]
What is an exempt contribution, and what is Form RC240?
An exempt contribution lets a surviving spouse or common-law partner contribute the deceased's TFSA proceeds into their own TFSA without using their own contribution room. The contribution must be made during the rollover period (date of death to December 31 of the year following death), and CRA Form RC240, Designation of an Exempt Contribution to a Survivor TFSA, must be filed within 30 days after the contribution.[1][4]
What changed for TFSA exempt contributions in 2026?
Starting January 1, 2026, earnings accrued in the TFSA after the holder's death, up to the end of the rollover period, can also be designated as an exempt contribution. Before 2026, only the value at death qualified, and post-death growth was taxed as ordinary income to the beneficiary.[1][7]
Does this work in Quebec?
Successor holder and beneficiary designations are generally not accepted on non-insurance TFSAs in Quebec — designations must be made in the will instead. The surviving spouse can still use the exempt-contribution process to shelter the proceeds in their own TFSA.[3]
What if the RC240 form is late or the deadline is missed?
If the contribution is not designated as exempt in time, it counts against the survivor's own TFSA contribution room. Any amount beyond available room is an excess, taxed at 1% per month while it remains. The exempt contribution is also unavailable if the deceased's TFSA had an excess at death, or if payments were received by more than one survivor.[1][6]
Sources
- CRA — If you are a designated beneficiary of a TFSA: successor holder rules, exempt contributions, RC240 deadlines, and the January 1, 2026 change on post-death earnings
- Scotiabank — What is a TFSA: successor holder transfer without affecting contribution room; beneficiary exempt-contribution window and RC240 30-day filing
- Canada Life — Taxation at death of a TFSA: exempt-contribution conditions, spouse-only eligibility, estate and probate treatment, Quebec rules
- CIBC Investor's Edge — What happens when a TFSA holder dies: successor holder vs beneficiary, pre-2026 FMV-at-death limit, Quebec note
- Fidelity Canada — Estate planning and TFSAs: designations, exempt contributions, no-designation estate treatment
- Insight Law — TFSA beneficiary vs successor holder: rollover period, RC240 30-day rule, 1% per month excess penalty
- AdvisorStream — What happens to someone's TFSA after they die: the 2026 change equalizing successor and beneficiary treatment for a surviving spouse
- ATB — Tax-Free Savings Account 2026 Reference Guide: exempt-contribution conditions, excess and multiple-survivor disqualifiers
Is your TFSA set up the Gold way?
One designation, checked in five minutes, can save your spouse a form, a deadline, and probate. If you are not sure what is on file for your accounts, let's review it together.
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