Understanding Estate Duty

Understanding Estate Duty

Estate Duty and Capital Gains Tax are taxes paid after you die in South Africa. All property belonging to a person at the date of his death forms part of his estate for the purposes of calculating estate duty. 

This is something to take into consideration when finalizing your estate planning, therefore it’s important to speak to a financial advisor especially if your assets are worth more than 3.5 million rands (USD 240 000.00).

What is the Estate Duty in South Africa?

Estate Duty is taxes paid to transfer of wealth (assets) from the deceased’s estate to the beneficiaries. 

Estate duty refers to a tax of 20% that is levied on the estate of a deceased person in accordance with the provision of the Estate Duty Act (the “Act”). Estate duty is levied on the dutiable portion of the deceased estate.

Are deductions allowed?

Allowable deductions include debts, funeral and death-bed expenses, administration costs, property transferred to a surviving spouse, and the first R3.5 million of the value of the estate.

The first R3.5 million of the value of an estate is not subject to Estate Duty. This allowance may be added to the allowance granted to the surviving spouse of a deceased person which amounts to a total of R7 million which is not subject to Estate Duty, upon the death of the second spouse.

How is it calculated?

According to the South African Revenue Services (SARS), the determination of Estate Duty can be summarised as follows:

SARS Estate Duty Calculation

When is Estate Duty due?

The tax is due within one year of the date of death or 30 days from the date of assessment if the assessment is issued within 1 year of the date of death. Currently, interest is levied at 6% p.a. on late payments.

Is your Life Insurance policy included in the estate?

At the time of one’s death, all assets and liabilities acquired during your lifetime are netted together in what is termed one’s ‘estate’.  If you have a life insurance policy, your life policy will be most likely included in the assessment of your estate.

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