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December 1, 2008
For immediate release
Province to Amend Act to Cover Tax-Free Savings Accounts
Office of the Attorney General
Introduced by the federal government in the 2008 budget, TFSAs will be available to Canadians on January 1, 2009. They are flexible, general purpose savings vehicles that will allow Canadians, who are 18 years and over, to set aside up to $5000 per year. Contributions are not tax deductible, but neither investment income nor withdrawals are included in taxable income.
“These new accounts allow people to save for a large purchase, or just a rainy day, without having to pay income tax on the accumulated interest or other forms of investment income,” said Attorney General Greenan. “Our proposed amendments will ensure that these accounts can be used as an estate-planning tool.”
Under the proposed amendments, TFSAs will now be included in the definition of a plan in the Designation of Beneficiaries under Benefit Plans Act. The amended legislation clarifies that where an account holder has designated a beneficiary, upon the death of the holder, the account assets transfer directly to the beneficiary rather than forming part of the estate.
“This change offers a couple of advantages to the beneficiary,” said Minister Greenan. “The TFSA will not go to probate, which means the beneficiary won’t have to wait for the estate to be settled to access the funds. In addition, the assets won’t be subject to probate fees. We believe this legislation supports the federal government initiative, and will allow Islanders to more fully benefit from these accounts as they plan their estates.”
For more information on Tax-Free Savings Accounts, individuals can visit the Canada Revenue Agency’s website www.cra.gc.ca.