TFSA limit boosted – does it change your estate planning game plan?
In the just-released federal budget, the TFSA limit was increased from $5,500 to $10,000/person/year. The new $10,000 amount is not indexed so don’t expect it to rise annually. Does this impact your financial plans?
Consider this: Historically spouses often held non-registered investments in joint accounts but the size of the TFSA reduces the need for that. Upon death a TFSA can bypass estate and hence bypass probate fees but only a spouse can receive the account whereas a joint account could be joint between any two (or more) adult people (eg parent and child), not just between spouses.
Also, use of the TFSA for seniors rather than a joint non-registered account reduces the recognition of current income (interest, dividends, capital gains, etc.) and therefore reduces the tax plus reduces the risk of claw-back of benefits such as Old Age Security.
As you get older, and especially if you have no spouse, the benefit of bypassing probate with a joint account may outweigh the reduced tax benefit of the TFSA. This must be considered on a case-by-case basis. If this is an issue you are dealing with, we would be glad to provide assistance.