What is a TFSA?

A Tax-Free Savings Account (TFSA) is a great registered investment account you can use to preserve for any big-ticket item or goal – tax-free. If you like more versatility and fewer taxes, consider opening a TFSA.

Know why 60% of Canadians invest in a TFSA
  • Pay no taxes on any investment earnings.
  • Contribute for as long as you want to—there’s no age limit.
  • Withdraw your money at any point for any reason
  • Make up for dropped contribution room from past years regularly.
  • Contribute even if you’re retired or not employed
  • Use a TFSA to save for anything while also preserving for retirement in an RRSP

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Types of TFSAs
  • An annuity contract
  • Deposits
  • An arrangement in trust

How to open a TFSA
  • You can have higher than one TFSA at any provided time, but the total amount you contribute to your TFSAs cannot be more than your possible TFSA contribution room for that year.
  • To open a TFSA, you need to do both of the following:
  • Contact your credit union, financial institution, or insurance company (issuer).
  • Provide the issuer with your SIN and date of birth so the issuer can record your qualifying arrangement as a TFSA. Your issuer may request supporting papers.

Types of permitted investments

Usually, the types of authorized investments in a TFSA are the same as those sanctioned in a registered retirement savings plan (RRSP). These would cover the following types:

  • mutual funds
  • cash
  • securities listed on a designated stock exchange
  • bonds
  • certain shares of small business corporations
  • guaranteed investment certificates

Death of a TFSA holder

After the holder of a TFSA expires, possible tax indications may vary depending on one or more of the following factors:

  • the type of TFSA
  • the type of beneficiary(ies)
  • how long, after the date of death, before amounts are distributed to beneficiaries
  • whether any income was earned after the date of death

Depending on the factors that practice, the following can be affected:

  • whether the deceased’s TFSA remains to exist or is considered to have ceased
  • how income collected after the date of death may be reported and taxed
  • whether a recipient can offer amounts received to their own TFSA, within specified limits, and whether such a contribution would sway their available TFSA contribution room

Types of beneficiaries

The types of beneficiaries for TFSA purposes are:

1. A descendant who has been designated as a successor holder

2. A designated beneficiaries (for instance, a survivor who has not been named as a successor holder), former spouses or common-law partners, children, and qualified donees

Determining the type of beneficiary is an important step and can be affected by:

  • designations that may have been made in the deceased holder’s TFSA contract
  • the terms of the dead holder’s will, if there is one
  • provincial or sectional succession legislation
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