By Elize Louw – Head of Estate Administration
Updated 11 July 2025
Estate planning is one of the most important steps you can take to secure your legacy and protect your loved ones. Everyone’s circumstances are different, which is why a living estate plan is crucial. It provides peace of mind by ensuring that your financial intentions are clear and legally structured.
Whether it’s nominating a beneficiary to a life policy, providing for your heirs, or ensuring immediate access to funds in the event of your passing, an estate plan answers critical questions such as:
- Is your estate liquid?
- Have you made provision for minor children?
- Do you have a special needs child who will need long-term financial support?
By clarifying these intentions, you can ensure that your estate planning strategy considers your policies, assets, and liabilities comprehensively.
Key Principles in Estate Planning
1. Estate Duty and Spousal Bequests
Under section 4(q) of the Estate Duty Act, no estate duty is payable on bequests to a surviving spouse. However, this transfers estate duty to the surviving spouse’s estate, where section 4(a) allows for an abatement of R7 million. Keep in mind: the growth of assets is also transferred, which could result in higher estate duty later.
2. Section 4(a) General Abatement
Each estate qualifies for a general abatement of R3.5 million. If assets valued at R3.5 million are bequeathed to a non-spouse beneficiary, this deduction applies before estate duty is calculated. This strategy prevents asset growth from inflating estate duty in the surviving spouse’s estate.
3. Life Policies as Deemed Assets
Life policies with nominated beneficiaries are considered deemed assets. While no executor fees apply, the policy may still be proportionally estate dutiable if the beneficiary is not your spouse and the net estate exceeds R3.5 million. Exceptions apply for correctly structured buy-and-sell or key person policies.
4. Group Life Benefits Through Employers
If you have group life cover, ensure that your beneficiary nominations are up to date. Previously, employers had discretion in distributing proceeds if no beneficiary was nominated. Today, the proceeds are paid into the estate, potentially delaying access for loved ones and increasing estate costs.
5. Capital Gains Tax at Death
Death triggers two capital gains tax (CGT) events:
- At the date of death – all gains are taxable with a R300 000 exemption (primary residence exempt up to R2 million).
- At asset transfer/realisation – further gains are taxable, with a R40 000 exemption and tax at 18%.
6. Estate Income Tax
Estates are registered for income tax, and while no rebates apply, certain exemptions do (e.g., SA-sourced interest). Dividend and growth income post-death is taxable in the estate.
7. Retirement, Living, and Life Annuities
These funds are exempt from estate duty, executor fees, and CGT. However, income tax may apply depending on whether beneficiaries opt for a lump sum or an annuity.
8. Worldwide Assets and Situs Tax
South Africans with international assets must consider situs tax in jurisdictions like the USA (40% above $60,000) or the UK (40% above £325,000). While double taxation is avoided through credits, estate duty in South Africa still applies.
9. Additional Estate Costs
Beyond taxes, estates face costs such as:
- Transfer and valuation fees
- Master and executor fees
- Municipal charges
- Funeral expenses
- SARS fees
- Ongoing living expenses for the surviving spouse
10. Providing for Minor Beneficiaries
Children under 18 cannot inherit directly. Without a testamentary trust, their inheritance will be managed by the Guardian’s Fund, which is not advisable. Setting up a trust ensures controlled distribution, tax efficiency, and long-term financial care.
11. Marital Regimes and Estate Planning
If married in community of property, all assets (yours and your spouse’s) are divided equally at death. With an antenuptial contract including accrual, both estates are compared to calculate the accrual liability or asset in your estate.
Why Regularly Review Your Estate Plan?
Life events such as divorce, remarriage, or the death of a beneficiary can drastically change your estate planning needs. Regularly reviewing your last will and testament ensures your wishes remain current and executable.
Frequently Asked Questions About Estate Planning in South Africa
1. Do life insurance payouts form part of an estate?
Yes, unless a beneficiary is nominated. If no beneficiary is named, the proceeds are paid into the estate and may be subject to estate duty and executor’s fees.
2. What happens if a minor inherits property?
Minors cannot directly inherit property or money. If you don’t create a testamentary trust, the inheritance goes to the Guardian’s Fund, which is not ideal. Setting up a trust gives more control over how and when funds are used.
3. How much estate duty is payable in South Africa?
Currently, estates qualify for a R3.5 million abatement. Estate duty is charged at 20% on net estates up to R30 million, and 25% above R30 million.
4. Is capital gains tax payable when someone dies?
Yes. Death triggers a capital gains tax event, with certain exemptions (such as the R2 million primary residence exemption). This can significantly impact the value of the estate if not planned for correctly.
5. Do international assets form part of a South African estate?
Yes. South Africans are taxed on their worldwide assets. Foreign countries may also impose estate or inheritance taxes, but credits usually apply to avoid double taxation.
Final Thoughts
A well-structured living estate plan goes beyond tax efficiency—it ensures financial security, minimizes costs, and provides peace of mind for you and your loved ones. Whether you need to account for estate duty, capital gains tax, or international assets, proper planning is the foundation of protecting your legacy.
