CRA finds that payment of family-law debt out of a TFSA to the surviving spouse could occur as a survivor payment

The definition of “survivor payment” in s. 207.01(1) - exempt contribution – para. (b) references a payment to the survivor directly or indirectly out of the former TFSA as a consequence of the deceased’s death. The exempt contribution can be contributed by the survivor to his or her own TFSA.

CRA considered that this requirement can be satisfied where the TFSA property is used for the payment of family-law debt of the deceased (e.g., obligations for support or under a separation agreement) to the surviving spouse, given the effect of the 248(23.1)(a) deeming rule.

CRA also indicated, similarly to 2016-0679751E5 F, that in light inter alia of s. 248(8)(a), a payment could be considered to be made to a surviving spouse directly or indirectly out of the former TFSA as a consequence of the deceased’s death where an executor in his discretion chooses to satisfy a legacy of specific property (in this case, of the residue of the estate, which included the family residence) by retaining the proceeds from the sale of the residence and instead paying an equivalent amount out of TFSA property.

Neal Armstrong. Summary of 6 June 2017 External T.I. 2015-0617331E5 Tr under s. 207.01(1) - exempt contribution – para. (b).