A few considerations of TFSA

If someone’s household income is in high tax bracket. They might want to minimize the interest generated in the margin account because it is not tax sheltered. It might be better to put the securities with price appreciation such as growth stocks. One day when they need to sell them, they could transfer-in-kind into TFSA and then sell it to minimize the capital gain tax. However, this takes planning because they need to have contribution room in TFSA.

Good news! TFSA contribution limit for 2023 is increased by $500 to $6500 from 2022.

Some people might have joint margin accounts shared with their spouses. Usually transfer between accounts required both accounts are under the same name.  Since TFSA is owned by one individual, most banks or brokerage firms require a letter of direction with signatures from both account holders of the joint accounts.

For Questrade, there is a primary holder vs a secondary holder. The primary holder is the one who applied for the joint account initially, The letter of direction needs to be submitted by the primary holder. This is slightly different from the joint account for a saving account of a bank. Both joint account holders have equal accesses and rights.

Also, please keep in mind the TFSA contribution limit. After the letter of direction for transfer in kind is submitted, it takes 1 or 2 business days to complete the transfer. The price will probably change, so we might want to leave enough buffer from the contribution limit. Furthermore, we can request to use the lowest price of the transaction date. This can lowest the contribution dollar amount and leave more contribution room.

Hope we can all take good advantages of TFSA!

Published by Worthfy

Financial literacy and counselling

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