Automatic TFSA Top-ups from Non-registered assets

Moving money from non-registered assets to a TFSA can help reduce future taxes payable on investment growth. This can be difficult to do manually since non-registered balances, TFSA contribution room, and client cash flow needs change throughout the projection. Snap can automatically move non-registered money to TFSAs for you.

Here is a 7-minute video overview to see the feature in action.

You can enable Automatic TFSA Top-ups from the Scenario Setup -> Assets -> TFSA page. You'll check the box to Maximize TFSA contributions for this scenario, which will automatically enable Use spousal resources if necessary. Snap will use the Client's available non-registered assets first and only use the Spouse's if necessary. Each checkbox applies to both spouses.

Snap typically separates cash flow for each spouse in the projection due to attribution rules related to investment income taxes. There is an exception if the transferred money is contributed to a TFSA. You can therefore use the Client's non-registered assets to transfer money to the Spouse and then contribute to the Spouse's TFSA. If you don't want to do this (e.g., if the clients maintain separate finances), you can uncheck the Use spousal resources if necessary box.

Once you enable Automatic TFSA Top-ups, you can review the resulting transactions on the Planning Pages.

Once the feature is enabled, Snap completes a series of calculations each year to determine if, and how much to contribute to TFSAs from non-registered assets.

1. Snap checks for TFSA Contribution Room. For instance, the Client may have $7,000 of room in 2025.
2. Snap checks to see whether there are any manual TFSA contributions already entered as overrides. For example, if you’ve already added a $3,000 contribution that the client plans to make from their Employment Income, Snap will only consider the remaining $4,000 of the $7,000 total TFSA room as available for top-ups from non-registered assets.
3. Snap checks how much the Client has available in non-registered assets.
4. If the Client has an insufficient amount, Snap checks how much is available in the Spouse's non-registered assets (if the checkbox to Use Spousal resources if necessary is enabled).

Snap then contributes the lower of:

1. The available Contribution Room ($4,000 in the case above).
2. The available money in the Client's and/or Spouse's non-registered assets.

The $3,000 above is a manually entered override taken from the Client's cash flow. The $4,000 Contribution is automatically generated by Snap and funded by transferring non-registered assets.

Snap will only contribute if there is a TFSA available for the year. You may need to add a new TFSA on the Scenario Setup -> Assets page if the Client doesn't have an existing TFSA or you've overridden the existing TFSA to make Contributions from cash flow.

If the Client has multiple TFSAs, Snap will use the CFM Method in the Financial Assets modal on the Planning Page to determine how to split the Contributions.

You can also override TFSAs on the Planning Page if you want to prevent Snap from contributing to the account.

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Once Snap calculates how much to contribute to the TFSA from non-registered assets, it withdraws the required amount from the Client’s and/or Spouse’s non-registered accounts.

Snap also considers the tax impact of the contribution in the year it’s made. For instance, if the TFSA Contribution reduces the Client's taxes payable for the year by sheltering interest and dividend income, then Snap will withdraw less than the full Contribution amount to account for the tax savings.

If the TFSA Contribution increases the Client's taxes payable for the year by creating a capital gain, then Snap will withdraw more than the Contribution amount to account for the additional tax cost.

This is done so that the Base Expenses aren't impacted by the strategy. This way, you can ensure that the client's ability to spend is equal or better to their original case when Automatic TFSA Top-ups is enabled.

If there are multiple non-registered assets available, similar to the TFSA Contributions, Snap will use the CFM Method in the Financial Assets modal on the Planning Page to determine how to split the Withdrawals.

You can also override non-registered accounts on the Planning Page if you want to prevent Snap from withdrawing from the account (e.g., if the client has company shares or an emergency savings account).

If the Client has insufficient non-registered assets and the Spouse's non-registered assets are used, you'll see a TFSA Contribution value in the Transfers section on the individual Planning Pages. In the first year of the projections below, a $7,000 TFSA contribution is funded with $3,000 from the Client's own non-registered asset before depleting the account, and a $4,000 Transfer from the Spouse.

The cash flow required for the $4,000 Transfer is withdrawn from the Spouse's non-registered assets in addition to the money needed to make their own TFSA Contribution.

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You can use the Comparing Scenarios tool to illustrate the benefits of topping up the TFSA each year from non-registered assets.

In the following case, we've created two scenarios. Scenario 1 uses the default Cash Flow Management (CFM) Logic for Contributions and Withdrawals. Scenario 2 enables Automatic TFSA Top-ups.

The TFSA top-ups increase the projected Estate After Tax in the final year by $72,061. It also allows the Client to spend $56,893 more in their working years by reducing their taxes payable on investment income.

It's important to consider any differences in Rates of Return between Financial Assets when you complete these comparisons. If you have a higher return on the non-registered account than the TFSA, then top-ups may seem worse. However, this is due to lower returns masking the tax benefits. You'll typically want to set all Financial Assets to the same Rate of Return when completing this sort of analysis.

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TFSA Top-ups are fully integrated into the other automated tools available in Snap (e.g., Cash Flow Management, Taxable Income Targeting). When you enable Automatic TFSA Top-ups, Snap will continue to contribute to and withdraw from the non-registered assets and TFSAs as needed. For instance, once the Cash Flow Management (CFM) is turned on, and there's a target Base Expenses value to achieve, Snap will withdraw from the non-registered assets to fund cash flow (if required) in addition to making the TFSA Contribution.

Similarly, if you have Taxable Income Targeting enabled, Snap will withdraw from the non-registered account to fund the TFSA Contribution, and then will make additional Contributions and Withdrawals to achieve the Target Taxable Income.

You can hover your mouse over the Contribution (Withdrawal) column for non-registered accounts and TFSAs to see how much of the value is part of a Transfer for TFSA top-ups.

In this case, $8,042 was withdrawn to fund the TFSA Contribution, and the remaining $939 (calculated as the full $8,981 withdrawal less the $8,042 transfer) was withdrawn to fund cash flow needs (e.g., Base Expenses).

In rare cases, you may see a withdrawal from a TFSA in the same year that a transfer is made. This may happen if the non-registered assets are depleted that year, or if you have the CFM Order set to withdraw from TFSAs first.

In this case, $5,733 was contributed to the TFSA from non-registered assets, and then $10,265 was withdrawn from the TFSA to meet cash flow needs (e.g., Base Expenses). ($10,265 is calculated as the amount transferred in of $5,733 plus the net change to the account for the year of $4,532). The TFSA top-up is processed at the start of the calendar year, and then the updated TFSA balance is considered to be available for any cash flow needs that year.

Since the TFSA top-up is coming from an existing non-registered asset, the Contribution is assumed to be made on January 1. This is the only Contribution in Snap that is assumed to be made at the start of the year. All other Contributions are assumed to be made on December 31 for simplicity and to be conservative. Assuming the TFSA Contributions are made January 1 ensures that the amount transferred earns the Rate of Return for the same year to allow a fair comparison to holding the money in the non-registered asset.

In this case, the $7,000 is transferred from the registered asset to the TFSA on January 1, and the Rate of Return of 4.1% is earned within the TFSA.

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