Estate duty is the tax payable on the value of a person’s estate when they die. Many families only discover how much it costs when the executor presents the liquidation and distribution account. By then, the only options may be to sell assets, use cash meant for the surviving family, or borrow.
The good news is that estate duty is predictable. The rules have been stable for several years, and the National Treasury made no changes to the estate duty rates or deductions in the 2026 Budget. With some planning, you can estimate your likely liability, make sure there is enough cash to pay it, and in many cases reduce it lawfully.
This article explains how estate duty is calculated, the main deductions, the timing of payment and the planning tools available.
How estate duty works
Estate duty is levied under the Estate Duty Act 45 of 1955. It applies to the worldwide assets of a person who was ordinarily resident in South Africa at the time of death, and to the South African assets of a non-resident.
The calculation follows three broad steps:
- Gross estate: the value of all property of the deceased, plus “deemed property” such as certain life insurance policies and claims under the accrual system of a marriage.
- Net estate: the gross estate less allowable deductions, including debts, funeral and administration costs, bequests to public benefit organisations and property passing to a surviving spouse.
- Dutiable estate: the net estate less the basic deduction (often called the abatement) of R3.5 million.
Estate duty is charged at 20% on the first R30 million of the dutiable estate and 25% on the amount above R30 million.
The spouse deduction and the portable abatement
Property that passes to a surviving spouse is fully deductible under section 4(q) of the Estate Duty Act. This means no estate duty is payable on whatever you leave to your spouse, although the assets may attract duty when the surviving spouse dies.
Under section 4A, any part of the R3.5 million abatement that is not used in the first-dying spouse’s estate can be carried over to the surviving spouse’s estate. If the first spouse leaves everything to the survivor, the survivor’s estate can deduct up to R7 million. This makes leaving everything to a spouse an attractive starting point for married couples, but it is not always the best overall plan, because it can concentrate assets (and the eventual duty) in the second estate.
What is included, and what is not
Life insurance
Proceeds of life policies on your life are generally deemed property of your estate, even if paid directly to a nominated beneficiary. There are exclusions, including policies under a properly structured buy-and-sell arrangement between business partners where the deceased did not pay the premiums, and policies payable to a spouse or child under a duly registered antenuptial or postnuptial contract.
Retirement funds
Lump sums and annuities from approved retirement funds are generally not property for estate duty purposes. However, contributions made after 1 March 2015 that were not allowed as an income tax deduction can be added back into the estate in certain cases.
Assets in trusts and companies
Assets owned by a properly established trust or company are not the deceased’s property. However, loans you have made to a trust, and shares you hold in a company, are assets in your estate.
Estate duty is not the only cost
Death is treated as a disposal of assets for capital gains tax, so capital gains tax may be payable on growth in value before estate duty is calculated. Assets passing to a surviving spouse are an exception. Executor’s fees, which are capped by regulation at 3.5% of the gross value of the estate plus VAT unless a lower fee is agreed, as well as conveyancing costs and Master’s fees, also have to be paid.
When must it be paid?
The executor must submit the estate duty return to SARS, and estate duty is payable within one year of the date of death or within 30 days of the date of assessment, whichever is later. Interest is charged on late payment. If the estate does not have enough cash, the executor may have to sell assets, including the family home or a business, to settle the duty and other liabilities.
Planning to reduce and fund estate duty
Use your will carefully
A well-drafted will can use the spouse deduction, the portable abatement and bequests to public benefit organisations deliberately. It can also give executors flexibility on how assets are distributed.
Lifetime donations
Individuals can currently donate up to R150,000 in each tax year free of donations tax. Spouses can donate to each other without donations tax. Regular donations, for example to reduce a loan account with a family trust, gradually move value out of the estate.
Freezing growth
Transferring growth assets to a trust or company, often on loan account, can freeze the value in your estate at the date of transfer, with future growth accruing outside your estate. Section 7C of the Income Tax Act 58 of 1962 now treats low-interest or interest-free loans to trusts as ongoing donations, so this strategy needs careful structuring and is less attractive than it once was.
Provide liquidity
Life cover owned by the right person, or paid into a testamentary trust, can provide cash for estate duty, capital gains tax and costs so that key assets do not need to be sold.
Plan around your business
If you own a business, a buy-and-sell agreement funded by life cover can provide cash for your heirs and keep the business with your partners. The policy structure affects whether the proceeds attract estate duty.
Estate duty checklist
- List your assets, liabilities, life policies and retirement funds, with estimated values.
- Estimate the dutiable estate, estate duty, capital gains tax and executor’s fees.
- Check that your estate has enough cash to pay these amounts without forced sales.
- Review your will to make use of the spouse deduction and portable abatement where appropriate.
- Check life policy ownership and beneficiary nominations.
- Consider a donations programme within the annual exemption.
- Review any loans to trusts in light of section 7C.
- Revisit your plan after major life events or significant changes in asset values.
How O’Reilly Law can help
We draft wills and testamentary trusts, advise on estate duty and liquidity planning, structure buy-and-sell arrangements and family trusts, and work with your financial adviser and accountant to model your estate’s tax position. Through O’Reilly Fiduciary, we also act as executor and administer deceased estates, including the estate duty return to SARS.
Contact us to review your estate plan.
Related reading: Testamentary trusts: protecting your children’s inheritance · Choosing an executor, and what executors actually do
This article is general information and not legal or tax advice. Correct as at November 2026.