Quick Answer: FHSA After Death in Plain English
An FHSA (First Home Savings Account) remains tax-exempt for a limited period after the holder's death, called the exempt period. The exempt period ends on the later of (a) December 31 of the calendar year after the holder dies, or (b) the date the FHSA trust ceases to exist.
During the exempt period, income earned inside the account is generally not taxable. After the exempt period ends, all income and any distributions become fully taxable to the recipient.
If the deceased named a qualifying spouse or common-law partner as successor holder, that person generally takes over the FHSA tax-free, and the exempt-period rules do not apply.
Why This Matters Right Now
If you have just lost someone and are trying to work out what happens to their First Home Savings Account, start here. The FHSA is a newer registered account, launched in 2023, and the rules around what happens when the holder dies are unfamiliar to most Canadians.
Executors are often caught off guard. A small mistake in timing can turn a tax-free balance into a fully taxable distribution for the estate or a grieving family member. The window to act is tight, and the CRA deadlines keep running whether or not the paperwork has caught up.
The good news is that the rules are workable once you understand the sequence. This guide walks through what the exempt period is, who inherits the tax shelter, and what the executor needs to do.
Quick Start: Pick Your Path
The surviving spouse named as successor holder
You generally take over the FHSA tax-free. The account continues in your name.
A spouse named only as beneficiary
You can usually transfer the funds tax-deferred to your own RRSP, RRIF, or FHSA.
A non-spouse beneficiary (adult child, parent, sibling)
Any distribution you receive is generally fully taxable as income in the year you receive it.
The executor and no beneficiary was named
The FHSA balance typically becomes part of the estate, and income earned after the exempt period ends is taxable to the estate.
How the FHSA Exempt Period Works
The CRA built this grace period into the FHSA rules so that executors would not be forced to liquidate the account the day after a death. Investments can continue to earn interest, dividends, and capital gains during the exempt period without triggering tax inside the account.
For more context, see our related tax and estate insights.
Successor Holder vs. Beneficiary
A successor holder is a surviving spouse or common-law partner who steps into the deceased's shoes. Taking over an FHSA as successor holder does not use up any of the successor holder's own FHSA contribution room.
A designated beneficiary receives a payment. A surviving spouse may elect to transfer the amount tax-deferred to their own RRSP, RRIF, or FHSA. For help with designations, see our estate and tax planning services.
| Factor | Successor Holder | Beneficiary (spouse) | Beneficiary (non-spouse) |
|---|---|---|---|
| Who qualifies | Spouse or common-law partner only | Spouse or common-law partner | Anyone named |
| What happens to the account | Continues in successor's name | Distributed; funds transferable | Distributed as cash payout |
| Tax treatment | Tax-free rollover | Tax-deferred transfer to RRSP, RRIF, or FHSA | Fully taxable as income |
| Impact on own FHSA room | None | Does not use own RRSP room | N/A |
| Reporting required | Minimal | CRA transfer election form | T4FHSA slip; T1 inclusion |
Comparing FHSA, TFSA, and RRSP at Death
A TFSA generally stays fully exempt. An RRSP is typically deemed fully withdrawn at fair market value on the date of death, with the entire amount included in the deceased's terminal tax return, unless a spousal rollover applies.
The FHSA borrows elements from both. For a deeper dive, see our TFSA and RRSP tax guidance.
| Rule | FHSA | TFSA | RRSP |
|---|---|---|---|
| Exempt period after death | Yes, limited | Yes, until Dec 31 of year after death | No |
| Spouse rollover available | Yes | Yes | Yes |
| Taxable to estate at FMV | Only if exempt period lapses | No | Yes, full FMV on terminal T1 |
| Non-spouse beneficiary tax | Fully taxable | Tax-free | On deceased's terminal return |
| Transfer to survivor's RRSP | Yes (spouse only) | No | Yes (spouse only) |
| Issuer slip at death | T4FHSA | T4A | T4RSP / T4RIF |
The Executor's Step-by-Step Roadmap
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1
Locate the FHSA Contact the financial institution and request current statements as of the date of death.
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2
Identify the designation Confirm whether the deceased named a successor holder, a beneficiary, both, or neither.
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3
Calculate the exempt-period end date Apply the "later of" rule: December 31 of the year after death, or the date the trust ceases.
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4
Decide the distribution timing If the successor holder option is available, the account can usually continue. If a beneficiary is receiving a payout, the timing has tax consequences.
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5
Request the T4FHSA slip The issuer typically prepares this slip for distributions and amounts included in income.
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6
Report on the correct return Income to the date of death goes on the terminal T1. Post-death income during the exempt period is generally sheltered.
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7
Close the account by the deadline If not transferred or distributed by the exempt-period end date, the remaining property is deemed distributed and taxed.
For comparable estate work, see how we have handled similar estate files.
Common Mistakes
The errors below are the ones we see most often on FHSA estate files. Each one is avoidable with a short conversation at the right moment.
- →Assuming FHSA rules match TFSA rules. The TFSA stays sheltered indefinitely for a successor holder, but the FHSA has a limited exempt period.
- →Missing the exempt-period end date and letting the account drift into a taxable year.
- →Naming only a beneficiary when the deceased could have named a spouse as successor holder.
- →Failing to request the T4FHSA slip from the issuer in time for the terminal return deadline.
- →Reporting post-death FHSA income on the terminal T1 instead of the T3 estate return.
- →Forgetting that a non-qualifying survivor, such as an adult child, cannot transfer FHSA property into their own RRSP or FHSA.
- →Overlooking Ontario probate implications on the FHSA balance where no beneficiary was named.
Frequently Asked Questions
What happens to my FHSA if I die before I buy a home?
How long does an FHSA stay tax-free after the holder dies?
Can my spouse take over my FHSA when I die?
What is the difference between a successor holder and a beneficiary on an FHSA?
Do beneficiaries have to pay tax on money they receive from a deceased person's FHSA?
Can my adult child inherit my FHSA?
Is a T4FHSA slip issued when the account holder dies?
Can the funds from my FHSA roll over to my spouse's RRSP after I die?
What does the executor need to do about an FHSA on the final tax return?
Does the FHSA balance go through probate in Ontario?
Get FHSA Estate Help from ClearWealth
Settling an estate is already difficult, and the FHSA is one of the newest pieces of the puzzle. If you are managing an estate that includes an FHSA, book a consultation before the first filing deadline arrives.
Book a ConsultationSources & References
- →Canada Revenue Agency. "First Home Savings Account (FHSA)." https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
- →Canada Revenue Agency. "Death of a holder of a First Home Savings Account." https://www.canada.ca/en/revenue-agency.html
- →Government of Canada. Income Tax Act — FHSA provisions. https://laws-lois.justice.gc.ca/eng/acts/I-3.3/
- →Ontario Ministry of Finance. "Estate Administration Tax." https://www.ontario.ca/page/estate-administration-tax
- →CPA Canada. "FHSA planning and estate considerations." https://www.cpacanada.ca/
