TFSA: Tax-Free Savings Account (2024)

Frequently Asked Questions

• What happens if I max out my TFSA?
• What if I’ve maxed out both my TFSA and RRSP?
• Can I use a TFSA to buy a house?
• What’s the difference between using a TFSA and using an RRSP to buy a house?
• Is there a specific type of TFSA for first-time home buyers?
• Can I open a TFSA for my kids?
• Can I have a joint TFSA with my spouse?
• Can I contribute to my spouse’s TFSA?
• What happens to my TFSA after death?
• Can my TFSA be transferred to my spouse upon my death?
• Can you transfer a TFSA to another TFSA?
• Can you transfer a TFSA to another person?
• Can a TFSA be transferred to a beneficiary?
• Is a TFSA taxable to a beneficiary?
• Is a TFSA taxable upon death?
• Is a TFSA subject to probate?
• How do I open a TFSA?
• How many TFSAs can I open?

What happens if I max out my TFSA?

If you've already maxed out your TFSA contribution room, you still have options. Consider contributing to an RRSP to boost your retirement savings. There are many clever ways to make the TFSA and RRSP work together to improve your wealth. As a general rule, RRSPs are a good choice for longer-term goals such as retirement. But TFSAs may work better for more immediate objectives, such as a wedding or a car. Take a look at these comparisons to understand the differences between a TFSA and RRSP.

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What if I’ve maxed out both my TFSA and RRSP?

If you’ve maxed out both your TFSA and RRSP, then you may consider getting a non-registered account. These are accounts that allow you to hold a variety of investments – with no contribution limits. Unlike an RRSP and a TFSA, you’ll be taxed on any income earned (e.g., interest, dividends and capital gains) within a non-registered account.

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Can I use a TFSA to buy a house?

Yes. You can use the funds in your TFSA for any reason, including making a down payment on a home.

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What’s the difference between using a TFSA and using an RRSP to buy a house?

The main difference is that withdrawals from a TFSA (to buy a home or any other reason) are tax-free, whereas RRSP withdrawals are taxable – unless you’re making RRSP withdrawals under the Home Buyers’ Plan (HBP). Under the HBP, you can withdraw up to $35,000 from your RRSP ($70,000 for a couple) to buy or build a qualifying home in Canada – whether it’s for yourself or for a relative with a disability. When you make withdrawals under the HBP, it’s like you’re borrowing from your RRSP. You’re expected to repay the withdrawn funds within a 15-year period of time. Otherwise, taxes will apply. You must meet certain conditions to participate in the HBP. Talk to an advisor to find out what works best for you.

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Is there a specific type of savings account for first-time home buyers?

In the 2022 Federal Budget, the Canadian government announced that they’re creating a new tax-free First Home Savings Account (FHSA) to help Canadian residents save up to $40,000 to buy their first home.

Where available, Canadian residents will be eligible to open a FHSA provided that:

• they’re over the age of 18 and
• they’re a first-time home buyer who hasn’t lived in a home they owned at any time during the part of the calendar year before the account is opened or at any time in the past four calendar years.

FHSA contributions will be tax-deductible. This means that you can claim a deduction and lower your taxable income, which may reduce the amount of tax you’ll have to pay overall.

And, like a TFSA, investment growth and withdrawals from a FHSA will be tax-free -- that’s provided you use your withdrawals to buy your first home.

What’s more, the lifetime limit on contributions would be $40,000, with an annual contribution limit of $8,000. It’s up to you to know and monitor your contribution limits.

Please remember that the FHSA won’t be available until 2023. Connect with a Sun Life advisor to find out how you can start saving up money to buy a house.

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Can I open a TFSA for my kids?

No, you can’t open a TFSA for your child. Your children can open their own TFSAs when they reach age 18. At which point, you can give them the funds to put in the account. However, there are other ways to save money for your children’s future. For example, if you’re looking to save for your child’s future education or training, you can open a registered education savings plan (RESP) on their behalf.

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Can I have a joint TFSA with my spouse?

No, a TFSA can be registered only in one person’s name.

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Can I contribute to my spouse’s TFSA?

No, you can’t contribute directly to your spouse or common-law partner’s TFSA. The TFSA account holder is the only person who can make contributions and withdrawals. However, you can give your spouse or common-law partner money that they can contribute to their own TFSA.

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What happens to my TFSA after death?

After you die, your TFSA funds will either go to your estate, a designated beneficiary or a successor holder. A beneficiary gets the money within the account, while a successor holder can take over the entire account. You can name anyone as your beneficiary, but only a spouse or common-law partner can be a successor holder. If you don’t have a beneficiary or successor holder, your account will go to your estate.

If you’re a resident of Québec, please note that you can only name a beneficiary or a successor owner to a TFSA held in an insurance product, such as a segregated fund contract or an Insurance GIC.

Learn more about the differences between a beneficiary and a successor holder.

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Can my TFSA be transferred to my spouse upon my death?

When you die, your TFSA will either go to:

• your designated beneficiary (which can be anyone, including family or friends),
• your successor holder (which can only be a spouse or common-law partner), or
• your estate (if you don’t have a designated beneficiary or successor holder).

As a successor holder, your spouse or common-law partner can take over your TFSA after you die. They then become the new owner of the TFSA, and the account maintains its tax-free status. And, as the successor holder, they can choose to keep separate TFSAs or merge them with another TFSA in their own name. Learn more about what can happen to your TFSA after you die.

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Can you transfer a TFSA to another TFSA?

Yes, you can transfer funds from one TFSA to another.

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Can you transfer a TFSA to another person?

No, you can’t transfer your TFSA to another person.

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Can a TFSA be transferred to a beneficiary?

If you named a beneficiary for your TFSA, then they’ll inherit the funds within your TFSA after you die. At that point, they can transfer those funds into their own TFSA – that’s provided they have TFSA contribution room available. Please note that any income earned within the TFSA between the date of death and the date that the funds are distributed to the beneficiary, will be taxable to the beneficiary. Connect with a Sun Life advisor for more detailed information.

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Is a TFSA taxable to a beneficiary?

The amount that’s accumulated within the TFSA isn’t taxable to the beneficiary when the account owner dies. But the beneficiaries will have to pay tax on any income earned between the date of the account holder’s death and the date that the full balance is paid out to them.

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Is a TFSA taxable upon death?

No. It’s not taxable upon death.

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Is a TFSA subject to probate?

If you don’t name a successor holder or beneficiary for your TFSA, then it may be subject to probate after you die. Probate is a legal process that confirms the validity of a will and the appointment of an executor (who carries out the terms of your will). Many estates will need probate if there are assets that need to be distributed. If you don’t have a will, then the court will appoint an estate administrator. Get answers to more frequently asked questions about probate.

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