Thanks...I guess I wait a little longer than for my niece!

Here is the article my CA sent me in response to my query:

7. What happens when a TFSA holder dies - Financial Post - By Jamie Golombek

Canada's new tax free savings account just celebrated its six-month birthday.

Yet, despite the reams of advertising and promotion surrounding these new accounts, there is still quite a bit of confusion about what happens upon the death of the TFSA holder. This has become an even hotter issue recently given that most provinces have now passed legislation to permit the holder to name a successor holder or beneficiary on the account.

The advantage of doing so is that the assets in the TFSA can flow directly to the named successor or beneficiary without going through the estate. This means potential savings on probate fees.

From an income tax perspective, when the holder of a TFSA dies, the fair market value of the TFSA immediately before death is considered to be received by the holder tax-free.

The decision to name either a successor holder or beneficiary on a TFSA doesn't affect the tax treatment upon death, but can have an impact on taxation beyond the date of death.

Successor holder This person can only be your surviving spouse (or partner). If you name a successor holder, the TFSA continues growing tax-free and your surviving spouse steps into your shoes and becomes the new TFSA holder.

Beneficiary If your spouse is named as a beneficiary of your TFSA instead of a successor holder, she has until Dec. 31 of the year following death to contribute any payments received out of her deceased spouse's TFSA into her own TFSA without affecting her unused TFSA contribution room. To do this, however, she must file CRA Form RC240 within 30 days after the contribution is made.

The disadvantage here is that all income earned inside the TFSA, as well as any increase in the fair market value of the TFSA's assets from the date of death until the date the TFSA is paid out to the spouse beneficiary will be taxable as ordinary income to the beneficiary. This includes amounts that otherwise may be tax-preferred Canadian dividends or capital gains. That's why it's best to name your spouse as the successor holder instead of the beneficiary.

Finally, if you name someone other than your spouse as the TFSA beneficiary, or you don't name anyone at all and the TFSA proceeds have to be paid to the estate, any income earned in the TFSA after the date the holder died will simply be taxable to the beneficiary or the estate as ordinary income.

Jamie Golombek, CA, CPA, CFP, CLU, TEP, is the managing director, tax and estate planning, with CIBC Private Wealth Management in Toronto.