The tax free savings account is a cost-effective investment tool not only because it shields your savings from taxes, but also because a TFSA is not necessarily subject to probate and can be used to pass an inheritance confidentially to a beneficiary.
With a TFSA, you can designate your spouse as successor holder. That means the account will go to your surviving spouse, and the money will remain registered with no effect on your spouse's contribution room. The account will also avoid probate. However, if you want to pass a TFSA to someone other than your spouse, then the rules are different.
To pass a TFSA to your child, for example, you would name that child as beneficiary. The difference, though, is that upon your death the account will lose its tax-sheltered status. The money will be transferred to an account in the beneficiary's name, and if there are future capital gains, then those will be calculated based on the value of the account at the time of your death. Still, the TFSA account will pass without being accounted for in the calculation of the estate administration tax (probate fees).
Like a trust, a TFSA can provide confidentiality in the distribution of assets. The TFSA will avoid probate and thus remain confidential as long as you designate a successor holder or beneficiary. Not making these designations will result in the account going through probate, which is public.
The degree of privacy afforded by the TFSA may be especially appealing if you intend to leave a larger inheritance to one of your heirs than to another. But you need to be careful Confidentiality in these matters could help a family avoid disputes and potential estate litigation but an also cause distrust among them leading to a conflict.
For more on asset protection and the full range of estate planning options, please see Hagel Lawfirm's inheritance planning overview.