All About Estates

More from the CRA on Survivor Payments from TFSAs

In my last post, I wrote about a recent Technical Interpretation from the CRA where the CRA was asked to consider whether a survivor payment could be made by an executor out of a deceased taxpayer’s TFSA (or, more specifically, former TFSA) to the deceased’s spouse in satisfaction of a legacy left to the spouse. In other words, in circumstances where the spouse was not the designated beneficiary of the TFSA.

The CRA concluded that this was possible. Such a payment would be considered to have been made “as a consequence of death”, a requirement for a survivor payment, if paid in accordance with the deceased’s Will. Other conditions for qualification as a survivor payment, such as having the transfer occur within the rollover period, would still need to be met. A more fulsome discussion of the CRA’s reasoning can be found in my earlier post which is accessible here: http://www.allaboutestates.ca/survivor-payment-tfsa-spouse-not-designated-beneficiary/.

The CRA has subsequently provided more information regarding the situations in payments from a deceased holder’s former TFSA to the TFSA of his or her spouse or former spouse, where the spouse or former spouse is not the designated beneficiary of the deceased’s holder’s former TFSA, may qualify as exempt contributions to the surviving spouse’s or former spouse’s TFSA. Overall, it is good news for the loved ones of taxpayers who forgot to execute their beneficiary designation forms.

In Technical Interpretation 2015-0617331E5 F the CRA was asked whether the following payments could qualify as exempt contributions from a deceased taxpayer’s (former) TFSA to a survivor’s TFSA: (1) a payment made in satisfaction of a debt owed by the deceased to the survivor spouse where the debt was incurred as part of a matrimonial regime; (2) a payment made as part of a post-mortem spousal support obligation; (3) a payment made in satisfaction of an obligation arising under a marriage contract between the deceased and the survivor; and (4) in satisfaction of a bequest of a residence or legacy to the survivor.

For the payments referred to in (1), (2) and (3) above, the CRA indicated that it will generally consider such payments to have been made as a consequence of the death of the deceased TFSA holder. As a result, they will generally qualify as exempt contributions provided that they are made during the rollover period and all other relevant conditions are met. The question for (4) was very similar to that considered in the CRA’s earlier technical and the CRA confirmed its prior position on this point. In such circumstances, the CRA will generally consider the amount to have been distributed as a consequence of the death of the deceased holder if the distribution was made in accordance with the terms of the deceased’s Will. Again, other conditions for qualification as an exempt contribution, including that the transfer occur within the rollover period, must still be met.

About Katie Ionson

Katie Ionson is an Associate in Fasken Martineau DuMoulin LLP’s Wealth Management, Charities and Not-for-Profit Group. As part of her wealth management practice, Katie assists clients with Wills, powers of attorney, trusts, marriage and domestic contracts, and trust and estate administration. She has experience using estate planning to address a variety of client objectives, including income splitting arrangements, asset protection and business succession issues. Katie is engaged in a broad practice in the areas of charities and not-for-profit law, which includes preparing applications for charitable status, assisting clients with transitioning to the new federal or provincial not-for-profit legislation, drafting endowment and gift agreements and advising on administrative and tax-related issues.

Email: kionson@fasken.com

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