Ontario residents who hold Tax-Free Savings Accounts are now able to designate beneficiaries for their accounts, the Ontario government announced on Tuesday.

The measure, which was first proposed as part of the 2009 Ontario Budget, will allow a TFSA owner’s funds to flow more directly to loved ones at the time of death, the government said.

It follows similar legislation passed by several other provinces since the launch of the TFSA at the beginning of 2009. Ontario joins British Columbia, Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, P.E.I., Northwest Territories and Yukon Territory as provinces where TFSA holders can designate beneficiaries.

“This is something that people have been waiting for in Ontario for a long time,” said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth Management in Toronto.

Under the measure, a beneficiary will receive funds outside of a will in the same way that beneficiaries currently receive proceeds of registered retirement savings plans.

The result is an easier process of transferring the assets in the account upon death, and the elimination of probate fees that would otherwise be involved. This is particularly advantageous to account holders in Ontario and British Columbia, where probate fees are higher, according to Golombek.

“Ultimately, as these accounts get bigger and bigger, the opportunity to save some provincial fees could be significant,” he said.

Ontario Finance Minister Dwight Duncan said the change was part of an effort to ensure Ontarians can take full advantage of TFSAs.

“Tax-free savings accounts are an excellent tool to save money or plan for retirement,” he said. “That is why we are streamlining the process and lessening the administrative burden for beneficiaries.”

Any designations that have been made on existing accounts will remain legally effective, the government said.

Golombek said he hopes the legislation will eventually come into place across the country.

“We don’t know for sure what every province is going to do, but we hope that the other remaining provinces follow suit,” he said.

IE