Transferring stocks into a TFSA

Question

I have a large amount of money tied up in shares of the company I work for. I have room in my TFSA and wonder if it is possible to transfer the stock into this account without cashing them first? Also, do you have any tips on negotiating the transfer fees from the full service brokerage to this new one? I know it is time for me to make the move, but I’m a little nervous about it.

Answer

Making the move to a discount brokerage can feel like a really big step. I’m not surprised to hear that you’re nervous about it because a lot of people are. But once you get through the paperwork and set up the account I think you’ll find it’s as easy to use. I remember when I set mine up years ago it took some getting used to, but the navigation was intuitive and the call centre folks were helpful. I also learned that it was best to avoid calling at the opening or closing of the stock market as that’s when they tend to be the busiest.

Transferring stock into a TFSA

In terms of your company stock, you don’t have to sell it; you can just transfer those shares directly into your Tax Free Savings Account, provided that it is held within a brokerage. A TFSA at a brokerage allows you to hold all sorts of investments: stocks, ETFs, mutual funds, etc. But be careful if you open this account at a bank. If you set up your TFSA with your bank’s brokerage arm you should be fine, but the version that you set up with a bank teller may have restrictions. While you can transfer the stocks into your TFSA without selling them first, you could still trigger a tax event. If the stock has gone up in value you will have to pay tax on that gain. Only future gains will be sheltered and able to compound tax-free. However, if you have any capital losses saved up you can use them to offset the gain. On the other hand, if the stock you want to transfer into your TFSA has fallen in value you cannot claim the loss for tax purposes. In order to claim the loss you’d have to sell the stock outside the TFSA first. But be mindful of the superficial loss rule, which prevents investors from selling a stock to claim a loss and then buying it back in right back. If you sell the stock outside of the TFSA and buy it back within 30-days, the loss will be denied. Once the stock is moved over, promise me that you’ll take a look and see how much of your total portfolio it represents. You need to diversify out of your company’s stock; failing to do so is a mistake I see all too often. Even if you love your company and believe in its future, it still makes sense to review your exposure and reduce your position over time. If you need anecdotal evidence of how wrong things can go, just think about the pain suffered by employees of Nortel Networks who didn’t sell some of their shares before it came crashing down to earth.

Negotiating transfer fees

Transfer fees are typically charged by the brokerage firm that you are leaving. The fees aren’t huge—typically in the hundred-dollar range—but it is worth asking your new brokerage to reimburse you for them. It is a fairly common practice so it will be less like a negotiation and more like a request. It certainly doesn’t hurt to ask. Ideally you should enquire about fee reimbursements when you’re setting up the account so you have someone to follow up with directly if there is an issue.

Stretch outside your comfort zone

Embracing new habits around money—even just the logistics of it—isn’t easy. In fact, only yesterday I moved to online statements for my bank accounts, line of credit and credit card. That felt like a big step, even though it only took a few clicks and three minutes of my time. Stretching outside of your comfort zone to get a better handle on your money is a good thing in my opinion. It can make a big difference both in terms of your actual results and in terms of how you feel about you money.

About Bruce Sellery

Bruce Sellery is the CEO of Credit Canada, the country’s longest-standing non-profit credit counselling agency. He is a former MoneySense columnist.

Comments Cancel reply

Mike Bergeron says:

December 7, 2020 at 4:35 pm

Hi , wondering if someone can help me here. I’m thinking of transfering my Loblaw shares through Computershare to my TFSA. Is that a wise decision ? Thank you

Reply
1. MoneySense Editors says:
  
  December 16, 2020 at 4:41 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
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Nirali patel says:

December 19, 2020 at 9:22 am

i recently transfer my 70 stock to TFSA. one stock price was $570 when I purchase.
currently I got stock price of $624 in my TFSA.why is not getting the same rate When transfer stock to TFSA?

Reply
1. MoneySense Editors says:
  
  December 22, 2020 at 2:02 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
Susan Ransom says:

February 3, 2021 at 1:04 pm

Can you put QETH.u in your TFSA?

Reply
1. MoneySense Editors says:
  
  February 10, 2021 at 3:04 pm
  
  Thanks for the question. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
linda morgan says:

February 14, 2021 at 10:39 am

i have a mutual fund and want to know if i can transfer this money into a tax free savings account with out penalty or having tax taken off before transition

Reply
1. MoneySense Editors says:
  
  March 11, 2021 at 2:28 pm
  
  Thanks for the question. Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply
Sheila Lippiatt says:

June 26, 2021 at 9:07 pm

Why is it when you transfer some shares of a stock into your TFSA ,the present value of these shares is what is transferred in not the value at time of purchase. I was told there would a capital gains tax but not told about the present value.
That makes it like the shares were sold and repurchased -not a “transfer in”. ????? Please explain. PS- I see some one else asked the same question.

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1. Courtney Reilly-Larke says:
  
  July 29, 2021 at 11:05 am
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with a qualified advisor.
  
  Reply