TFSA 2015-2016 update | Page 3 | Tax Free Savings Accounts | Discussion forum

I think I actually have 2.5 suggestions!

The other half-suggestion that I would add is a reminder that in most FI's you can divide up your investment into smaller parcels. Thus, if you had, for example, $10,000 that you wanted to have for "emergency" or in 1-yr GICs of some sort, you could divide it into 5 x $2000, or 1 x $5000 plus 1 x $3000 plus 2 x $1000, etc. This gives you some flexibility, if you should need the cash, to just cash in a portion and leave the rest to collect the full rate of interest. Just be sure that you are dealing with an institution that offers a TFSA savings account so that, if you should ever decide to transfer, you can dump it all into one account first and pay only one transfer fee. And never trust institutions that don't have transfer-out fees. My experience is that, eventually, they all introduce them, if you wait long enough, and then they gradually increase them.

Loonie, the Globe writer chooses to compare only the head-to-head effects of two unrelated tax changes made by the Liberals. In fact there were other changes - for example, benefits for families with children, cancelling income splitting. So to me the article is not really useful as only a selective and partial look, not the overall picture, of the effects of the Liberal tax changes is presented.

Bill said

Loonie, the Globe writer chooses to compare only the head-to-head effects of two unrelated tax changes made by the Liberals. In fact there were other changes - for example, benefits for families with children, cancelling income splitting. So to me the article is not really useful as only a selective and partial look, not the overall picture, of the effects of the Liberal tax changes is presented.

As I read it, the author is discussing the outcomes of two measures which the current govt has actually implemented and which have been widely discussed, often in the absence of data, as helping or hindering. I find it useful to see the TFSA reduction in this broader context.

I am not familiar with benefits for families with children, as I have no young children.

The only income spitting measures that have been put into effect are pension income splitting, spousal RSPs, loans to spouses etc., none of which have been disturbed, nor have I heard of any intention to do so by the current govt.

Perhaps you were thinking of the Conservative proposal to have income splitting for pre-retirement couples with children. As I recall, this was intended for when the budget was finally balanced, which has not really happened and is not likely to happen any time soon. They had it in their 2011 campaign, but never did it because they couldn't afford to do it, quite understandable. Still can't. No change.

I looked at Bill's CRA link and didn't come to exactly the same conclusions.

This is from CRA: TFSA > Life events > Death of a TFSA holder > Successor holder:

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 continues to be 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 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 directly 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.

I think kanaka's wife would have no issues with withdrawing from any of his TFSA's, once she becomes their new holder, and re-contributing the withdrawn amount the next year to any TFSA she is the holder of.

I also think that there would be no change to her TFSA contribution room unless kanaka has overcontributed to his TFSA's.

I believe if you go into your account via My Account on CRA site you can access your TFSA history of contributions, limits, etc., though it's often not completely up to date as the institutions don't have to report to CRA until some time after year-end.

kanaka said

Bill said
There are no "lifetime limits" re withdrawals and recontribution.

Perhaps I did not word properly but "as of this year" the lifetime limit of a person of my age is $46,500 and each year that limit increases. And the ins, outs and reinvestments cannot exceed the limit when investing within the rules of the plan.

It can actually better than that. The TFSA contribution room amount given out each year by the Income Tax Act is just a starting point.

If I had contributed $20,000 of my $46,500 unused TFSA contribution room, I would have $26,500 room left. If that $20,000 in the TFSA became $50,000 and I withdrew it this year, then next year I would have

• the $26,500, plus
• the $5,500 given out each year by the Income Tax Act, plus
• $50,000 as the result of the withdrawal.

A total of $82,000 of unused contribution room.