Page 86 - A Canuck's Guide to Financial Literacy 2020

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Withdrawing and contributing in the same year is recommended only if you have available
contribution room. If you're capped in contribution room and then proceed to withdraw
$5,000 but only to deposit it back a couple of days later, you may be penalized up to 1% per
month on the excess amount. You can only contribute back the amount withdrawn on
January 1st of the following year.

Multiple Tax-Free Savings Account

Be aware that when you have multiple Tax-Free Savings Accounts at different institutions,
you must keep track of your contribution room. No matter where your TFSAs are located,
your contribution room is fixed as all the financial institutions would report your withdrawals
and contributions to the CRA at the end of the year.

Transfers between TFSAs

Transfers between TFSAs held at different institutions is permitted and no tax
consequences would arise. The transfer could be done "in-cash" meaning the holdings
would be liquidated or "in-kind" where the investment holdings would stay as is.

Tip: When transferring from a non-registered account to a TFSA, you may realize capital
gains.

Taxes at Death

With a Tax-Free Savings Account, you can choose to name a beneficiary or a successor
holder. Both situations would enable you to avoid probate fees but only one designation
would avoid tax implications.

Designating Spouse as Successor Holder

If you've named your spouse as a successor holder, upon death, your TFSA would become
their TFSA and the account would remain tax free. No impact would occur on her TFSA
contribution room and the account would not pass through the estate and there would be no
probate payable.

Keep in mind that you can only designate your spouse or common law partner as a
successor holder. A person other than spouse would be considered a beneficiary.

Designating Spouse as Beneficiary

If you've named your spouse as a beneficiary of your TFSA, the value of the account on
date of death can be paid to them or their TFSA, tax-free. However, if the TFSA rises in