Spouses and TFSA’s
First off, TFSAs are similar to RRSPs in that you can’t open a joint account with your spouse or common-law partner…government rules say only individual accounts are allowed. But can you contribute money to your spouse’s or common-law partner’s account?
Alas, no, you can’t CONTRIBUTE money, but you can GIVE money. There is a slight difference…contributing means you reap the rewards later on, whereas giving means your spouse or common-law partner reaps the rewards later on (because you gave the money to them as a gift). With a TFSA only the owner of the account reaps the rewards, so you can GIVE (gift) money to your spouse or common-law partner, and they will earn the investment income, not you.
Transferring TFSAs after marital breakdown
You are allowed to transfer the contents of TFSAs between partners if your relationship breaks down. But there are implications depending on how you do it. If you simply withdraw money from your own TFSA and then give it to your former partner, this affects both your contribution rooms, and may lead to inadvertent over-contributions.
If you want to avoid over-contribution on either of your parts, you must get your financial institution (or whoever issued your TFSA) to do this transfer DIRECTLY between the two accounts. Make sure to tell them you are requesting a marital breakdown transfer, and not a regular withdrawal and deposit scenario. At this point the transfer is not considered a withdrawal or contribution for either party and leaves both your contribution rooms unaffected.
In order for this to work, both you and your former spouse must be living apart at the time of the transfer. And finally, this direct transfer can only take place with written authorization, either from a court decree or from a written separation agreement. So when you notify your financial institution that you want to do this marital breakdown transfer between TFSAs, make sure you have the supporting documentation ready to go!
Income splitting with spouses
You are allowed to income-split by giving (gifting) money to your spouse’s or common-law partner’s TFSA so long as you also contribute to your own TFSA. What this means is that a high-income spouse or partner can give up to the annual contribution limit ($6,000 for 2022) to a lower-income spouse or partner to contribute to their own TFSA, so long as they also contribute up to the annual contribution limit for their own TFSA account, accessing a combined $12,000 contribution limit for that year. You can also do this with your children if they have their own TFSAs already set up.