FHSAs and the role of spouses

The benefits of the new tax-free first home savings account (FHSA) double when each member of a couple is eligible to open an account. Married or common-law partners should understand specific FHSA rules aimed at spousal relationships to ensure eligibility and maximum benefits.

Here are answers to some common questions about how spouses can use the new accounts.

How does a spousal relationship affect first-time homebuyer status?

To open an FHSA, an individual must be a first-time homebuyer, defined as someone who did not — in the current or previous four calendar years — live in a principal residence that either the individual or their spouse or common-law partner owned solely or jointly.

Consider the following example.

Carlos is a Canadian resident who is 34 years old. Carlos would like to open an FHSA in October 2023. He lives in a home owned by his common-law partner, so Carlos is not considered to be a first-time homebuyer. As a result, Carlos is not a qualifying individual and will not be permitted to open an FHSA.

It is important to note that first-time homebuyer status applies not only at the time an FHSA is opened but also when an FHSA holder attempts to make a tax-free withdrawal to purchase a first home. But the definition of a first-time homebuyer for withdrawal purposes is slightly different from the one that applies at account opening. Specifically, there is no reference to a spouse or common-law partner in the definition of first-time homebuyer for purposes of a tax-free withdrawal.

The result? Once an FHSA is opened, an FHSA holder can make a qualifying, tax-free withdrawal to purchase a first home even if they currently reside in a home that is owned by their spouse or common-law partner. Take the following example:

Joanne, a longtime renter, opened an FHSA in 2023, having met the eligibility criteria. In 2025 she moved into a home owned by her boyfriend, Jack, and began a common-law relationship. In 2030 the couple found a new home that they decided to purchase together. Joanne was able to make a tax-free, qualifying withdrawal from her FHSA to purchase the new home even though she lived in a home owned by Jack in the current and preceding four-year period.

Can one spouse contribute to the other’s FHSA and claim the related tax deduction?

Only the FHSA holder can contribute to their own account — not a spouse or common-law partner. Similarly, only the FHSA holder can claim the related tax deductions for contributions to the account.

That said, the rules do not prevent a spouse from gifting assets to a partner for the partner to contribute to their own FHSA. Where such a strategy is employed, the normal attribution rules that apply to gifts between spouses (i.e., taxation of resulting income to the gifting spouse) would not apply to FHSA income, as in the following example:

Earlier this year, Kelly contributed the maximum amount allowed to her FHSA. Her husband, Kevin, still has $6,000 of contribution room available. To take advantage of Kevin’s room, Kelly gives $6,000 to Kevin, which he promptly contributes to his FHSA. Kevin would claim the related tax deduction, and a withdrawal of FHSA income in the future would not be subject to attribution.

Can funds be transferred from a spousal RRSP to an FHSA?

FSHA rules allow for transfers from an RRSP to an FHSA provided the FHSA holder has not exceeded FHSA contribution limits. How do these rules apply to spousal RRSPs?

When the annuitant of a spousal RRSP makes a withdrawal from the spousal plan, an amount equal to contributions made by a spouse or common-law partner to any of the annuitant’s spousal RRSPs in the year of withdrawal or prior two-year period is taxed to the contributing spouse and not the annuitant. This is known as the spousal RRSP attribution period.

An annuitant of a spousal RRSP is permitted to transfer property from their spousal RRSP to an FHSA of which they are the holder, provided the annuitant’s spouse or common-law partner did not contribute to the spousal RRSP in the year of transfer or the previous two calendar years (i.e., the attribution period). If no contributions were made to the spousal RRSP in the attribution period, the normal RRSP to FHSA transfer rules apply. Take this example:

Saul contributes $5,000 to Carla’s spousal RRSP in April 2023. In June 2024, Carla decides to open an FHSA and maximize her FHSA on the same day. Carla’s FHSA contribution room for 2024 is $8,000 because this is the first year she opens an FHSA. Carla would like to contribute $3,000 and directly transfer $5,000 from her spousal RRSP to her FHSA. Carla would be able to contribute $3,000 to her FHSA, but, to avoid unintended tax consequences, she has to wait until at least Jan. 1, 2026, to make a transfer from her spousal RRSP.

What are the options for naming a spouse or common-law partner as beneficiary of an FHSA?

Per the Canada Revenue Agency, as with TFSAs, FHSA holders can name their spouse or common-law partner as “successor holder” on the FHSA contract or, in Quebec or any other jurisdiction, by way of will, in which case the FHSA would maintain its tax-exempt status.

If named successor holder, the surviving spouse would become the new holder of the FHSA upon the death of the original holder provided the surviving spouse meets the eligibility criteria to open an FHSA (i.e., is at least age 18, a Canadian resident and a first-time homebuyer). Inheriting an FHSA in this way would not impact the surviving spouse’s FHSA contribution limits.

When Tony opened his FHSA on May 1, 2023, he designated his spouse, Monica, as successor holder. Tony died on Sept. 13, 2023. Because Monica met the eligibility criteria to open an FHSA when Tony died, she was able to keep Tony’s FHSA and became the new account holder. Alternatively, Monica could have chosen to transfer the FHSA proceeds to her RRSP or RRIF, or receive the proceeds as a taxable payment.

If the surviving spouse is not eligible to open an FHSA at the time of their spouse’s death, amounts in the FHSA could instead be transferred to an RRSP, RRIF or a pre-existing FHSA^* if the surviving spouse has one, or withdrawn on a taxable basis. Direct transfers to RRSPs, RRIFs and FHSAs occur on a tax-deferred basis.

To avoid additional implications, the withdrawal or transfer should occur before the end of the year following the year of the FHSA holder’s death. Take the following example:

Brad died in August 2023. Prior to his death, Brad designated his spouse, Kyle, as the successor holder of his FHSA. Brad did not have an excess FHSA amount on the date of his death. Kyle has been a non-resident of Canada since January 2023; therefore, he is not considered to be a qualifying individual and cannot become the holder of the FHSA. Kyle must transfer or withdraw all the property of the FHSA by Dec. 31, 2024.

Alternatively, the FHSA holder can name any person (including a spouse or common-law partner) or organization (e.g., registered charity) as “beneficiary” of the FHSA on the account contract or by way of will.

If the beneficiary is the holder’s spouse or common-law partner, the beneficiary can transfer the proceeds to their own FHSA, RRSP or RRIF without tax implications before the end of the year following the year of the holder’s death. Alternatively, they can request a withdrawal, which would be taxable to them:

Fred names his spouse, Rhonda, age 35, as beneficiary of his FHSA. Fred passes away in May 2025. As no successor holder is named on the account, the proceeds could be paid (or in the case of a spouse or common-law partner, paid or transferred) to a designated beneficiary and the account closed. As beneficiary, to avoid immediate tax implications, Rhonda requests a direct transfer of Fred’s FHSA proceeds to her FHSA, which is completed before Dec. 31, 2026, on a tax-deferred basis. Rhonda does not require FHSA contribution room to complete the transfer.

If the beneficiary of the FHSA is not the deceased holder’s spouse or common-law partner, the funds would be paid to the beneficiary (or the deceased’s estate where no beneficiary is named) following the death of the FHSA holder. Amounts paid to the beneficiary (or deceased’s estate) would be included in the income of the beneficiary (or estate) for tax purposes.

Wilmot George, CFP, TEP, CLU, CHS, is vice-president, Tax, Retirement and Estate Planning with CI Global Asset Management. Wilmot can be contacted at wgeorge@ci.com.

Notes

* The ability of a surviving spouse (who was named successor holder but not eligible to open an FHSA) to transfer the deceased’s FHSA to their own FHSA is a proposal that has not yet passed, as of this article’s publication date. The ability to transfer to an RRSP or RRIF has already passed.