Adv. Sankie Morata CFP®, Chief Executive Officer of Sanlam Trust

When someone dies, the South African Revenue Service (SARS) doesn’t close their tax file. Any outstanding tax returns, assessments, or unpaid tax can become a priority claim against the deceased estate.

Adv. Sankie Morata CFP®, Chief Executive Officer of Sanlam Trust, notes that estates are often delayed for months, and sometimes even years, when tax affairs are incomplete or when records are difficult to trace. If our affairs are not in order, our loved ones will bear the consequences.

As the 2026 tax year gets underway, Morata urges South Africans to take stock of their financial affairs for the sake of the people they will one day leave behind.

How tax debt can delay winding up estates

When we pass away, our estate cannot simply be divided among our loved ones. Before any of our assets can be distributed to our beneficiaries (the people who inherit), the executor (the person legally appointed to wind up the estate) must ensure that our tax affairs are fully resolved.

Morata explains, “The executor dealing with the estate needs to ensure that the deceased’s income tax returns have been filed and that they were compliant throughout their lifetime. If they were a provisional taxpayer, that compliance needs to be in order too. And if there are any years where filings were skipped, or tax obligations were not met, the executor must go back and sort that out before anything else can happen.”

For business owners, the risk multiplies. Even dormant companies or entities registered in your name can trigger SARS queries that delay estate finalisation, and an executor may have to untangle years of outstanding filings before beneficiaries see a cent.

The real cost of incomplete tax affairs

Beyond income tax, there are additional layers of tax that can arise at death.

Capital gains tax: a ‘deemed disposal’ at death

Capital gains tax (CGT) can come into play because, for tax purposes, death is treated as a disposal of certain assets at market value on the date of death (a ‘deemed disposal’), even if nothing is actually sold. The estate may need to settle the resulting tax before assets can be transferred to beneficiaries.

Following the 2026 National Budget proposals, David Thomson, Senior Legal Adviser at Sanlam Trust, says: “Increasing the tax-exempt capital gain for deceased estates from the current R300 000 to R440 000 is a welcome relief to taxpayers. However, it does not remove the need for the executor to fully resolve the deceased’s tax affairs before assets can be distributed.”

CGT can apply to assets such as businesses, shares, and investment properties, and may also be relevant to a primary residence. The first R3 million of any gain on a qualifying primary residence is excluded.

Estate duty: when your estate exceeds the threshold

Estate duty is a tax that the estate may owe before your family can receive their inheritance. In simple terms, SARS looks at the total value of what you own at death, subtracts allowable deductions,liabilities and then applies a R3.5 million ‘tax-free’ allowance (called an abatement). Only the remaining amount (if any) is taxed. Where estate duty applies, it is charged at 20% on the first R30 million of the taxable portion and 25% above that, and it generally needs to be paid before assets can be transferred to beneficiaries.

Why a will is non-negotiable

Alongside tax compliance, an up-to-date will and well-organised records are among the most practical tools to simplify the estate process for your family and your executor.

However, despite the critical role a will plays in simplifying this entire process, a significant number of South Africans still do not have one. The 2025 Sanlam Legacy Wills Survey Report reveals that 43% of those without a will believe they simply do not need one, a misconception that can have far-reaching consequences.

A legally binding, up-to-date will ensures that your assets are distributed according to your wishes and that your loved ones are not left navigating a complicated legal process at an already difficult time. Without one, the estate is administered according to the Intestate Succession Act, which may not reflect the deceased’s intentions and can result in additional delays and administrative complexity.

What you can do today

Morata encourages South Africans to take the following practical steps to ensure their estates can be administered as smoothly as possible:

• Speak to a financial adviser. A qualified financial adviser can assess your current financial position, identify potential tax liabilities, and help you put the right structures in place.

• Ensure your tax returns are up to date. This applies to both personal and business tax affairs. If you have businesses registered in your name, even dormant ones, make sure their filings are current.

• Draft or update your will. Your will should be informed by a comprehensive estate plan that considers all your assets, liabilities, and family circumstances. Review it at least once a year, or whenever a significant life event occurs (marriage, the birth of a child, buying property, or starting a business).

• Keep your records organised. Ensure that important documents (your will, tax records, policy documents, title deeds, and details of your financial adviser and tax practitioner) are accessible to your loved ones or executor.

• Have the conversation. Estate planning is not something that should be done in isolation. Talk to your spouse, your family, and your adviser about your wishes and your financial position.

Planning is an act of love

“I always ask people: do you want to rest in peace and leave your family in chaos?” Morata concludes. “The question is simple, but it puts everything into perspective. If you’ve worked hard to create wealth, you need to protect it. You need to create a legacy that allows the next generation to thrive.”

ENDS