Estate duty and executor's fees
When someone dies, their estate has to be wound up before anything passes to the heirs. Two costs come out of it along the way: the executor's fee for doing the work, and estate duty, the tax on what you leave behind.
The executor's fee
An executor administers the estate: collecting assets, settling debts, and distributing what's left. The fee is set in law at a maximum of 3.5% of the gross value of the estate's assets, plus VAT, which works out to about 4.025% including VAT. On a R5,000,000 estate that's up to about R201,000.
The 3.5% is a ceiling, not a fixed price. You can negotiate a lower rate when you nominate an executor in your will, and it's worth doing.
Estate duty
Estate duty is charged on your dutiable estate, which is roughly the value of everything you own at death, less debts, allowable deductions, and an abatement.
- Every estate gets a R3,500,000 abatement (section 4A). Only the value above it is dutiable.
- The rate is 20% on the dutiable amount up to R30,000,000, and 25% on anything above that.
So an estate worth R5,000,000 with no other deductions has R1,500,000 above the abatement, and estate duty of R300,000 (20%).
The spouse exemption
Anything you leave to your surviving spouse is exempt from estate duty (section 4(q)), which defers the duty until the second death. On top of that, the R3,500,000 abatement is portable: if the first spouse to die doesn't use theirs, it rolls over, so the surviving spouse's estate can have up to R7,000,000 abated. Good planning uses both.
What sits outside the estate
Not everything counts the same way:
- Retirement annuities and pension/provident funds generally fall outside your estate, for both the executor's fee and estate duty.
- Life policies with a named beneficiary pay out directly, so they skip the executor's fee, but their proceeds are often still "deemed property" for estate duty (unless the beneficiary is your spouse or another exemption applies).
- Assets held in a trust aren't yours at death, so they fall outside your estate.
Why it matters: liquidity
These costs need cash. If your estate is mostly a house and a car, your family may have to sell assets in a hurry to pay the executor and the duty. That's exactly what life cover is for: it provides the cash so the estate stays intact. Our life-cover guide folds these final expenses into the LIFE method.
Related guides
- How much life cover do I need?: sizing cover that includes final expenses.
- TFSA vs retirement annuity: RAs sit outside your estate, which matters for planning.