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Deceased Estates and Taxes

By Louis Schoeman • | Updated: Jun 10, 2026 • 👤 12 years forex trading | FSCA financial educator • Methodology • Advertising Disclosure

Death and taxes

There is a common idiom that refers to the certainty of two things on planet Earth, namely: ‘Nothing is certain, except death and taxes.’ This famous quotation is ascribed to Benjamin Franklin (1706 - 1790), considered one of the foremost of the founding fathers of the USA, and a major contributor to the Constitution of the USA. He was also well-known for his experiments with electricity. Franklin used this quotation in a letter to Jean-Baptiste Le Roy (1720 - 1800), a French physicist who worked on several topics, of which his research on electricity was particularly important. In his letter to Le Roy, Franklin wrote: ‘Our new Constitution is now established and has an appearance that promises permanency; but in this world, nothing can be said to be certain, except death and taxes.’ Certainly, taxes have an effect during a person’s life, but also after his or her death, as explained in this article.

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What is a deceased estate?

A deceased estate comes into existence when a person dies, leaving property and/or other assets, or a document referred to as a will or a document claiming to be a will. In such a case, a deceased estate is administered in terms of the Administration of Estates Act (Act 66 of 1965). When an individual dies without a valid will, the person’s deceased estate is administered according to the Intestate Succession Act (Act 81 of 1987). The South African Revenue Service (SARS) defines in its Guide of FAQs about deceased estates, Issue 3, a deceased estate as follows: ‘In general, a deceased estate is not a person but simply a collection of rights and obligations of the deceased person administered by an executor. However, for income tax purposes, a deceased estate is regarded as a ‘person’ by way of the inclusion of such an estate in the definition of a ‘person’ as defined in section 1(1) of the Income Tax Act.’ (Accentuation by the article writer.) When a deceased estate comes into existence, the estate of the deceased person is frozen. In terms of South African laws, the following deaths initiate a deceased estate:

The death of an individual who dies within the Republic of South Africa, who leaves property and or other assets, or a valid will, or any document that is intended as a will.
The death of a person who dies outside the Republic of South Africa, but who leaves property and/or other assets, and/or a valid will, or any document that is intended as a will, in the Republic of South Africa.

Estate Planning provides detailed information about the requirements to report and register a deceased estate.

Tax requirements and guidelines for deceased estates

In the SARS Guide mentioned above, tax requirements for deceased estates are explained. For instance:

A person’s tax liability ends at the date of his/her death, while the date of death also indicates the end of the person’s assessment year.
The deceased estate is considered a new taxpayer concerning any income and liabilities that arise after the death of the person involved.
However, regarding income tax, there is a distinction between a deceased person and the deceased estate of the person, explained by SARS as follows: ‘Although the deceased estate is treated as a natural person, it is not regarded as the same natural person as the deceased person.’
The tax rate applicable to individuals also applies to a deceased estate.
Tax thresholds allowed for individuals do not apply to a deceased estate.
Contrary to an individual, a deceased estate cannot be a provisional taxpayer.

Years of assessment for deceased estates are determined as follows:

First year: Commences on the day after the date of death and ends on the last day of February.
If the liquidation and distribution account (L&D account) is finalised before the end of the assessment year, the year of assessment will end on such date.
Subsequent years of assessment: The executor of a deceased estate is required to submit income tax returns for each year of assessment until the L&D account is finalised.

Income earned and expenditure incurred after the date of death must be allocated to each relevant assessment year until the finalisation of the deceased estate.

A tax return should be submitted for each assessment year until the date the deceased estate becomes distributable. Furthermore, even when a deceased estate is finalised during the year of assessment, a tax return must be submitted for the entire year of assessment during which the liquidation and distribution process was finalised.
The residence of a deceased estate is determined by whether the deceased person resided in South Africa in the ordinary course of his or her day-to-day life, meaning whether the deceased person was an ordinarily resident in South Africa.
If the deceased person was regarded as a resident for income tax purposes by way of a physical presence in the country, but not as an ordinarily resident, only the property of the person situated in South Africa is included in the deceased estate for estate duty purposes.

Taxable income According to SARS, the following types of income are taxable in the deceased estate:

All local and foreign income, excluding the deceased estate of a non-resident, where only the income earned in South Africa is taxable.
Rental income from immovable property.
Income gained from trading and farming.
Trust income.
Capital gains on assets disposed of by an executor.

Non-taxable income The following types of income are not taxable in a deceased estate:

IRP5/IT3a type of income, for instance, lump sums or vesting of share options.
Income received after the date of death, such as a bonus, which relates to a period before death ‘accrues to the deceased person as at the date of death and not to the deceased estate.’ It is required that such income be declared in the deceased person’s final return.

Partially taxed income Income from investments, rental, or trade, which have accrued prior to the date of death and thereafter, must be divided as follows between the deceased person and the deceased estate:

Income that accrued up to the death date must be included in the final tax return of the deceased person.
Income that accrued after the date of death must be part of the income and expenditure account of the liquidation and distribution (L&D) account.

The following expenses are not allowed as deductions in the deceased's estate:

Costs regarding advertisements for debtors, creditors, and the L&D account.
Master’s fees.
Executor’s remuneration, as well as the value-added tax (VAT) on the remuneration.
Postage and petty.

The following deductions or exemptions are allowed:

The interest exemption for a taxpayer below 65 years of age applies to the deceased estate even if the deceased person was older than 65.
Regarding capital gains tax (CGT) - See ‘Capital gains tax’ below.

The following deductions are, amongst others, not applicable to a deceased estate:

Provisional tax.
Any normal tax rebates.
Medical and travelling deductions.

A deceased estate is entitled to a deduction under section 18A of the Income Tax Act for a bequest to a qualified benefit organisation. Concerning an assessed loss:

The loss may not be carried over from the deceased person to the deceased's estate.
Any losses incurred in the deceased estate may be carried over until the L&D account becomes distributable.

Regarding the registration for PAYE and application for voluntary disclosure relief (VDP) by a deceased estate, SARS instructs as follows: ‘The executor, as the representative taxpayer of the deceased person and deceased estate, acts as the “representative employer” for PAYE purposes. If the deceased person should have registered as an employer but failed to do so, the executor can act in a representative capacity on behalf of the deceased person to apply for voluntary disclosure relief.’ A crypto asset (depending on the circumstances applicable and the facts available) is viewed as a trading stock for income tax purposes. Estates and Taxes

Taxes applicable to deceased estates

This article deals with the following three taxes: estate duty, donations tax, and capital gains tax (CGT), as applied to deceased estates. The article, ‘Deceased Estates and Taxes - Part 2,’ focuses on the application of value-added tax (VAT) on deceased estates.

Estate duty

Estate duty refers to the duty levied by SARS under the Estate Duty Act (Act 45 of 1955), ED Act for short, on the dutiable amount of a deceased estate. The purpose of estate duty is the transfer of wealth or assets from the deceased estate to the beneficiaries of the estate, according to SARS. The estate duty rate is 20% when the dutiable amount of a deceased estate does not exceed R30 million, and 25% when the dutiable amount exceeds R30 million. These rates came into effect on 1 March 2018. The dutiable amount of a deceased estate is calculated as follows: Value of property R xx Plus: Value of deemed property R xx GROSS VALUE OF THE ESTATE R xxx Less: Allowable deductions/expenses (R xx) NET VALUE OF THE ESTATE R xxx Less: Section 4A rebate (R xx) DUTIABLE AMOUNT OF THE ESTATE R xxx The section 4A rebate is an abatement of R3.5 million (since 1 March 2007) provided by the Estate Duty Act for all individuals. Naturally, when the dutiable value of the estate is R0.00 or less, no estate duty is levied. Estate duty was previously referred to as succession duty. The article, ‘Inheritance Tax in South Africa,’ provides more information about estate duty, while the SARS Guide, previously referred to, answers questions about estate duty, covering a whole range of topics. For example:

The types of property, including crypto assets, which can be included in the deceased estate.
What property is regarded as deemed property?
Property excluded from a deceased estate.
No exemptions are allowed by the ED Act, except for the exclusion of certain property.

The impact of the matrimonial property regime on the calculation of estate duty. For instance:

Marriage out of the community of property - where each spouse has his or her estate - but where the accrual system applies: The spouse with the smallest accrual will have a claim against the other spouse.
Marriage in a community of property, where a joint estate exists: Upon the death of one spouse, the entire estate must be administered. However, the surviving spouse has a 50% interest in the joint estate and is allowed to claim his or her 50% share.

List of expenses allowed as deductions to reduce the value of the estate. For instance, debts owed in South Africa, administration and liquidation costs, value of books and pictures, and bequest to the surviving spouse. The impact of the section 4A abatement (R3.5 million) if the deceased had a predeceased spouse at the time of death. A spouse who qualifies as a ‘spouse’ for estate duty purposes is ‘any partner in:

a marriage or customary union recognised in the Republic of South Africa,
a union recognised as a marriage under the tenets of religion, or
a same-sex or heterosexual union, which the [SARS] Commissioner is satisfied is intended to be permanent.’

Also, ‘under section 13 of the Civil Union Act [Act 17 of 2006], read with the definition of “spouse’ in the ED Act, a civil union partner is also included as a spouse.’

A crypto asset must be included as property (movable asset) in the deceased estate and is valued at the fair market value at the date of death. The crypto asset must also be declared in the final tax return of the deceased person.

Donations tax

In South Africa, an inheritance received by an individual is not taxable, but donations from deceased estates are treated differently from inheritances. For resident individuals (in legal terms called locally residing donees), a donations tax of 20% is applicable on the first R30 million of donations received during a tax year. On donations exceeding R30 million, a further 25% donations tax is applied, with an annual exemption of up to R100 000 of all donations received during the specific tax year. An annual exemption of up to R10 000 is allowed for companies and trusts which receive gifts or donations. Some donations are tax-exempt from donations tax. For instance, donations between spouses and donations made to certain public benefit organisations. If a donor, such as a deceased estate, donates property to a donee and the donee is unable to pay the donations tax, both the donor and donee become jointly liable to pay the donations tax. Such a scenario could cause serious financial implications for a deceased estate.

Capital gains tax (CGT)

The executor of the estate should disclose and submit the CGT calculation (together with the proof of documentation) to SARS as part of the deceased person’s annual income for the year of assessment in which he or she died. SARS will assess the CGT calculation and documentation submitted and then confirm the amount of CGT payable by the estate. SARS allows the following deductions and exemptions for a deceased estate regarding CGT:

Any capital gain (not exceeding R2 million) on the disposal of a primary residence.
No CGT implication on property that is inherited by a surviving spouse. The roll-over principle will apply.
CGT exclusions on personal use assets.
The deceased estate will be taxed at the same rates and enjoy the same inclusion rate for CGT as applies to natural taxpayers.
The exclusion and inclusion rates are as per the current tax assessment year.

A CGT-assessed loss may not be carried over from the deceased person to the deceased's estate. When a crypto asset is considered a capital asset, capital gains tax (CGT) may apply. Note: It is advisable to make use of the services of a registered tax consultant who will provide you with tax advice and support you on various tax issues.