How To Return A Car You Can’t Afford
What happens if you buy a car and quickly realize it's not something you can afford? Find out if and how you can return a financed car you can't affor...
A Tax-Free Savings Account (TFSA) is a great way to set money aside tax-free. Contributions are generally tax-free, as is any income earned in the TFSA. These are tax-free even when they are withdrawn from the account. To open or contribute to a TFSA, you must be 18 years of age or older and have a valid social insurance number (SIN).
Your TFSA does not simply disappear when you die. It goes to either a designated successor holder or beneficiary. You must name these parties before your death in your TFSA contract or your will.
Your TFSA contribution room cannot be passed on to a successor holder or beneficiary.
A successor holder is the spouse or common-law partner of the TFSA account holder at the time of their death. That person becomes the new account holder. They have the same rights as the TFSA account holder, including the right to revoke any beneficiary designation and to make contributions (provided the successor holder has unused contribution room).
All provinces and territories except Quebec allow for the designation of a successor holder for a TFSA. They can be designated in the TFSA contract or a will.
Successor holders become the new TFSA holders, and the TFSA continues growing tax-free. Keep in mind that any contributions that exceed the limit will be taxed.
Check out the difference between a TFSA and an RRSP.
A beneficiary is named as the new account holder of the TFSA in the TFSA contract or in the deceased TFSA account holder’s will.
If the deceased TFSA account holder’s spouse or common-law partner has been designated as a beneficiary instead of a successor holder, they can contribute some or all of the TFSA value to their own TFSA by designating it as an exempt contribution. Their own unused TFSA contribution room is not affected. Non-spousal beneficiaries cannot make exempt contributions to their TFSAs.
The fair market value of the TFSA immediately before the deceased TFSA account holder’s death is tax-free, but any income earned on the TFSA’s assets or increase in their fair market value is taxed as ordinary income.
Protect your family by getting life insurance.
If you don’t have a designated successor holder or beneficiary, your TFSA falls to your estate. This will add your TFSA to the value of your estate. Your estate will thus need to pay larger probate fees, which are the fees associated with having the courts legally approve your will. The assets in your TFSA are taxed as ordinary income.
Check out these tax credits for seniors.
To avoid complications with your TFSA after you die, dictate what you want to be done with it in your will or name beneficiaries or a successor holder before you die. If you name your estate as the recipient, you can distribute the TFSA proceeds based on the terms of your will.
In provinces and territories that allow successor holders, you can appoint the successor holder in your will. You can also designate beneficiaries in your will.
A TFSA is a great way to set money aside tax-free. When you die, your TFSA goes either to a successor holder or beneficiaries named before your death. If you don’t have a designated successor holder or beneficiaries, the TFSA falls to your estate where it will result in larger probate fees. Therefore, you should either designate the successor holder or beneficiaries in your TFSA contract or your will. Other than a 1% monthly tax on over-contributions to a TFSA, further contributions are generally tax-free.
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What happens if you buy a car and quickly realize it's not something you can afford? Find out if and how you can return a financed car you can't affor...
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