OK guys, I am going to discuss what none of us really wants to hear but needs to be addressed. I have been through this situation and I do not want anybody else to suffer through what my family had to deal with.

When we all set up our tfsa accounts we were supposed to be asked to name a Successor Holder, which I am sure most of us were not because most providers at the time did not even know what that ment. We were asked to name a benificary, but in the grand scheme of things this doesn't mean a whole lot.

When a SH is named and the holder of the tfsa passes away then the entire account is transfered into the name of the SH, a 5 minute procedure. If there is no SH named then the fun begins. In my case all the shares were sold by the bank and the money was put into the estate of the deceased. On top of all this there will be some capital gains that will have to be paid at tax time because the government looks at the account value at the time of death and charges the tax on the increase in value when the shares are sold. This procedure does not happen overnight, it took 3 months and in that time the share price increased quite a bit increasing the account value which means more capital gains to be paid.

The process was a nightmare and I would rather if nobody else has to deal with it. With the potential of our SP gaining and a possible payout, I am sure nobody wants to deal with being forced to sell their loved ones shares and paying tax on the profits.

If you have not named a Successor Holder please contact your tfsa provider and get it done.

Successor Holder

In provinces or territories that recognize TFSA beneficiary designation, the survivor can be designated as a successor holder in the TFSA contract or in the will.

A survivor can be named in the deceased holder’s will as a successor holder to a TFSA, if the provisions of the will state that the successor holder acquires all of the holder’s rights including the unconditional right to revoke any beneficiary designation, or similar direction imposed by the deceased holder under the arrangement or relating to property held in connection with the arrangement.

If named as the successor holder, the survivor will become the new holder of the TFSA immediately upon the death of the original holder.

This is the case for all three types of TFSA: deposit, annuity contract and trust arrangement.

The deceased holder is not considered to have received an amount from the TFSA at the time of death if the holder named his or her survivor as the successor holder of the TFSA. In this situation, the TFSA continues to exist and the successor holder assumes ownership of the TFSA contract and all of its contents. However, where the TFSA contract is a trust arrangement, the trust is the legal owner of the property held in the TFSA.

The TFSA continues to exist and both its value at the date of the original holder’s death and any income earned after that date continue to be sheltered from tax under the new successor holder.

Except in cases where an excess TFSA amount existed in the deceased holder’s TFSA at the time of their death, the successor holder’s unused TFSA contribution room is unaffected by their having assumed ownership of the deceased holder’s account.

The issuer will notify the Canada Revenue Agency (CRA) of this change in ownership.

The successor holder, after taking over ownership of the deceased holder’s TFSA, can make tax-free withdrawals from that account. The successor holder can also make new contributions to that account, subject to their own unused TFSA contribution room.

If the successor holder already had their own TFSA, then they would be considered as the holder of two separate accounts. If they wish, they can transfer part or all of the value from one to the other (for example, to consolidate accounts.) This would be considered as a qualifying transfer and would not affect available TFSA contribution room.

In certain cases, a survivor, designated as the successor holder of a TFSA, may not have a valid Canadian social insurance number (SIN) which is normally one of the eligibility requirements for opening a TFSA. If the survivor is a Canadian resident, they should apply to Service Canada to obtain a valid Canadian SIN.

If the survivor is a non-resident, they should request an individual tax number from the CRA by completing Form T1261, Application for a Canada Revenue Agency Individual Tax Number (ITN) for Non-Residents.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/dth/sccrhldr-eng.html