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Tax guides / TFSA, RRSP and RESP / Quick guide

What happens to your TFSA, RRSP and life insurance when you die?

Short answer

Each account is treated differently. A TFSA passed to a spouse named as successor holder stays tax-free. Any other beneficiary gets the value at death tax-free, but growth after that is taxable. An RRSP or RRIF is included in full on the final return. The exception is when it passes to a spouse or partner, or a financially dependent child or grandchild, under the rollover rules. Life insurance pays a tax-free death benefit to the named beneficiary. Other property is deemed sold at fair market value at death, with a rollover to a spouse and the principal residence exemption still available.

Rex Tax Inc. · Information checked against official sources. Last updated October 3, 2026 · Published October 3, 2026

Who this is for

Anyone with a TFSA, an RRSP or RRIF, a home or life insurance. This is for people who want to know what the tax return looks like after they die. Also family members who have just become responsible for someone’s affairs. This guide covers tax and insurance. Wills, trusts and probate are legal matters for a lawyer or notary.

The five rules

  1. TFSA: successor holder or beneficiary. A spouse or common-law partner named as successor holder becomes the holder; the account and its growth stay tax-free. Any other named beneficiary receives the value at the date of death tax-free, and growth after that is taxable to them. A surviving spouse who receives the money as a beneficiary can designate it as an exempt contribution to their own TFSA. This must be done within the CRA’s rules and deadline.

  2. RRSP and RRIF: taxed on the final return, unless rolled over. The fair market value of the plan at death is income on the deceased’s final return. That can mean a large tax bill in one year. The amount is reduced when it passes to a spouse or partner and is transferred to their RRSP, RRIF or annuity. It is also reduced when it passes to a financially dependent child or grandchild under the specific rules.

  3. Life insurance: a tax-free death benefit. The Financial Consumer Agency describes the death benefit as a one-time, tax-free payment to the beneficiary. Naming a person directly means it passes outside the estate; naming the estate means it goes through the will. Group coverage through an employer usually ends when the job ends, so check what is in force.

  4. Everything else: deemed sold at death. Capital property is treated as sold at fair market value immediately before death. Gains are reported on the final return. Property left to a spouse or a spousal trust rolls over at cost, so the tax is deferred until the spouse sells or dies. The principal residence exemption can still be claimed for the home.

  5. The final return and the clearance certificate. The legal representative files the final return by April 30 of the following year, or six months after death for deaths in November or December. Before distributing the estate, they can ask the CRA for a clearance certificate. Without it they can be personally liable for unpaid tax up to what was distributed.

How the pieces connect

The beneficiary forms on each account decide which rule applies. So a change in family, a marriage, a separation, a birth or a death, is the moment to check them. Life insurance can provide the cash to pay the tax on an RRSP or a rental property that the family wants to keep. That is a planning conversation between the tax side and the insurance side, not a product.

One thing many people do not realize

Naming your spouse as beneficiary of a TFSA is not the same as naming them successor holder. A beneficiary gets the value at death tax-free, but the account closes and any growth after death is taxed. A successor holder takes over the account itself, tax-free, without using their own room. It is one box on the form, and it matters.

What to prepare

  • The beneficiary and successor-holder designations on every TFSA, RRSP, RRIF and pension
  • Life insurance policies, including workplace coverage, with named beneficiaries
  • The cost and purchase date of the home, rental property and investments
  • The will, so the tax plan matches what it says

When professional help may make sense

A second marriage with children from the first, or a rental property or business that the family wants to keep. An RRSP with no spouse to roll to. An estate that must be settled quickly.

How Rex Tax may be able to help

We prepare final and estate returns. We explain the tax outcome of each account for your family. We also point out where insurance may cover a tax bill. Parminder Singh Oberoi handles the insurance side through Punjab Insurance Agency Inc. We do not draft wills or give legal advice.

Official sources

Related guides

This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.

Settling an estate, or planning yours?

We prepare final returns and explain the tax side of each account. Wills, probate and legal advice need a lawyer or notary; we are not a law firm.

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