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Collection of 1,000 Questions - Investment Planning - Question 12 on Real Estate, LSIFS and TFSAs

Posted by David Gobeil on

“The question, seems to cite the TFSA at Martins death first as $35,000, then later in the question as $49,000.”

 I changed the root of the question to specify the FMV today is $49,000.

 Your client, Martin, passed away last year leaving his surviving spouse, Elizabeth, as the sole beneficiary of his estate. At the time of his death, he had a tax-free savings account (TFSA) with a fair market value of $35,000. In his TFSA contract, he had not filled out the part about a successor holder, but he named Elizabeth as the beneficiary of his estate. The named beneficiary of the TFSA is Martin's estate. The estate will be settled this month. The fair market value (FMV) of Martin's TFSA is now $49,000.

Solution

The solution is fine.

(Choice A) By naming a spouse or common-law partner as the beneficiary of a TFSA, an individual who is the holder of a TFSA can provide for a spouse or common-law partner to become the successor holder of the TFSA upon the individual's death. The named beneficiary of the TFSA is Martin's estate. So, Elizabeth will not become the successor holder of the TFSA.

(Choice B is true.) If payments are made from the arrangement to a survivor of the holder within the two-year period following the holder's death, the survivor may contribute up to an equivalent amount to his or her own TFSA, within that same period, without affecting the survivor's TFSA contribution room. So, Elizabeth may contribute the fair market value of the assets at the time of Martin's death to her own TFSA.

(Choice C) The estate will be settled this month. The fair market value (FMV) of Martin's TFSA is now $49,000. The total exempt contributions designated during the rollover period cannot exceed the fair market value of the deceased holder's TFSA at the time of death. Upon payment of the funds to Elizabeth, the amount may exceed the FMV at the time of Martin's death. So, Elizabeth may not contribute any payments that she receives from Martin's TFSA to her own TFSA.

(Choice D) If payments are made from the arrangement to a survivor of the holder within the two-year period following the holder's death, the survivor may contribute up to an equivalent amount to his or her own TFSA, within that same period, without affecting the survivor's TFSA contribution room. So, Elizabeth will not have to use her TFSA contribution room in order to contribute any payments from Martin's TFSA to her own TFSA.


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