Estate Duty in South Africa: The Complete Guide for 2025/2026

By Roy Bregman, admitted attorney since 1974 · Bregman Moodley Attorneys Inc

Estate duty is the tax levied on the estate of a South African resident at death. It is governed by the Estate Duty Act 45 of 1955 and administered by SARS. For high-net-worth individuals, it represents one of the most significant financial events their families will face — and one of the most manageable with proper planning.

This guide explains how estate duty is calculated, what the current thresholds are, which assets attract duty, and — critically — the legal strategies available to reduce your exposure.

The 2025/2026 Estate Duty Rates

The R3.5 million abatement is a deduction — not an exemption — applied to every estate. This means the first R3.5 million of your net dutiable estate is free of estate duty. Only the amount above this threshold is taxed.

Practical example: An estate with a net dutiable value of R10 million is taxed as follows: R10,000,000 minus the R3,500,000 abatement leaves R6,500,000 subject to duty. At 20%, estate duty payable is R1,300,000.

What Forms Part of Your Dutiable Estate?

SARS casts a wide net. Your dutiable estate includes:

• All property owned at date of death — residential and commercial property, vehicles, shares, cash, investments, art, jewellery
• Proceeds of domestic life insurance policies (where the estate, not a nominated beneficiary, is the beneficiary)
• Your share of any joint estate (if married in community of property)
• Donations made within five years of death may be clawed back if made in anticipation of death

Key Deductions That Reduce Your Dutiable Estate

• Debts and liabilities owed at date of death
• Funeral expenses and administration costs (including executor’s fees of 3.5%)
• The spousal exemption (Section 4(q)): Assets left to a surviving spouse are fully exempt from estate duty, regardless of value. This is the single most powerful estate planning tool in South African law.
• Bequests to approved Public Benefit Organisations (charities registered with SARS under Section 18A of the Income Tax Act)

The Spouse Rollover: How to Double Your Abatement

This provision is poorly understood but enormously valuable. When the first spouse dies and leaves their entire estate to the surviving spouse (using the spousal exemption), no estate duty is payable. Furthermore, the unused portion of the first spouse’s R3.5 million abatement rolls over to the surviving spouse’s estate. This means the second estate to be administered may benefit from an abatement of up to R7 million — potentially eliminating estate duty entirely on moderately sized estates.

Estate Duty and Capital Gains Tax: The Interaction

Death triggers a “deemed disposal” for capital gains tax (CGT) purposes — SARS treats the deceased as having sold all their assets at market value on the date of death. This CGT liability is then itself a deductible expense for estate duty calculation, providing partial relief from what would otherwise be double taxation. The primary residence CGT exclusion on death is R2 million. Assets transferred to a surviving spouse receive a CGT rollover — the liability is deferred until the spouse sells or dies.

The Seven Most Effective Legal Strategies to Reduce Estate Duty

1. Inter Vivos (Living) Trusts

Assets held in a properly structured discretionary living trust do not form part of your personal estate at death. The trust continues after your death, with assets passing to trust beneficiaries outside of the estate administration process — avoiding both executor’s fees and estate duty on those assets. Trusts must be established well in advance and must not be a sham arrangement.

2. The Spousal Bequest Strategy

Structuring your will to leave assets to your spouse using the Section 4(q) exemption defers estate duty entirely until the second death — and allows the rollover of the abatement to the survivor’s estate. This is not tax evasion; it is precisely the arrangement the legislature intended.

3. Buy-and-Sell Agreements for Business Owners

Where a business is a significant estate asset, a properly structured buy-and-sell agreement — typically funded by life insurance — allows the estate to realise the value of the business interest efficiently without forcing a distressed sale. Without such planning, the executor may be forced to liquidate business assets at unfavourable terms to pay estate duty.

4. Retirement Annuity and Pension Fund Nomination

Benefits paid from approved retirement funds (pension funds, provident funds, retirement annuities) do not form part of your dutiable estate for estate duty purposes. Correct nomination of beneficiaries to these funds is a straightforward and highly effective way to reduce your dutiable estate.

5. Charitable Bequests

Bequests to approved Public Benefit Organisations are estate duty-free. For individuals with philanthropic intentions, structuring a charitable bequest in the will can simultaneously honour those intentions and reduce estate duty.

6. Estate Liquidity Planning

A common and painful problem: an estate that is asset-rich but cash-poor. Property cannot easily be liquidated quickly, and if estate duty is due within one year of death, heirs may face forced property sales. Life insurance held in a trust or properly structured within an estate plan provides liquidity to pay duty without distressing asset sales.

7. Donations During Your Lifetime

You may make donations of up to R100,000 per year free of donations tax. Strategic, long-term gifting reduces the eventual estate. Note: SARS may claw back donations made within five years of death where the intention was clearly to evade estate duty — proper documentation and advice is essential.