Are you aware of the massive potential of a well nurtured TFSA Account? (Keep reading if you’d like to own a 7-figure TFSA…)
Are you aware you can name a spouse as Successor Holder to maintain the account in the event of the account holder’s death?
When I got married, my wife planned the wedding, honeymoon, and filed all the paperwork to legally marry. I did something extremely important too. I filed the paperwork to name her as Success Holder of my TFSA Account at Olympia Trust and vice versa.
What's the difference between a Successor Holder and a Beneficiary?
The best way to describe the difference is that a beneficiary would inherit the money, but a successor holder would inherit the account. That means that a beneficiary of a TFSA would receive all the money within the TFSA tax-free but then the TFSA would get shut down. (Reference Link)
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, depending on their own unused TFSA contribution room. (Reference Link)
The potential of a well nurtured TFSA account
As they grow, TFSAs will become increasingly important tools for tax savvy Canadians. I personally prioritize investing my family’s TFSAs before non-registered (taxable) investments, and in some cases, even before RRSP contributions. TFSA accounts didn’t receive a ton of fan fare from High-Net-Worth Canadians when they were introduced in 2009 due to the modest introductory limit of $5,000.00. However, since 2009 prudent investors who have squirreled away cash into their TFSAs will have seen impressive gains.
The value of your TFSA at the end of 2023, assuming maxed out contributions and monthly compounding at an annual rate of 8%, would be approximately $195,814.57.
With simple forward-looking math it is very easy to see how TFSA accounts with steady contributions and compounding can become very powerful (We asked ChatGPT: if you began investing in 2009 as above, and continue to make average annual contributions of $7,500 with an 8% annual return and monthly compounding, the value of your TFSA at the end of the 20-year period would be approximately $1,178,070.00)
Keep in mind that this capital, or any income generated by this capital is completely tax free to withdraw or re-invest.
Imagine wielding two 7-figure TFSA accounts each capable of generating 6-figure annual tax-free income… add a layer of protection naming each spouse as a Successor holder to the other – not a bad 20-year anniversary gift – I hope you agree!
Even investors who have yet to start their TFSA snowball are not too late. Assuming you were over the age of 18 in 2009 – you will enjoy an initial contribution limit of $88,000.00. (Reference Link) Younger generation can start their TFSA contributions when they turn 18 – and while they cannot invest $88k out of the gate, they benefit from the most prized advantage in the investing world – the power of time.
If you would like help to ensure your TFSA at Olympia Trust has named the correct Successor Holder, or if you have any other questions about investing with registered funds (RRSP, RESP, LIRA, RIFF, etc). please contact Scott Stevens, Hosper’s registered MIC dealing representative,* at
Regards,
James Grantis
Director of Investments
Hosper Mortgage