The elephant in the room

The depletion of intergenerational wealth

The loss of generational wealth – where statistically 70% of wealthy families lose their wealth by the second generation and 90% by the third – isn’t only about poor investment decisions and business failures. It also happens when a primary earner dies and families discover too late the extent of their tax obligations and administrative burdens all the while trying to maintain liquidity. For many high-net-worth families, the idea of losing substantial wealth seems unthinkable. Yet, death can trigger a cascade of financial obligations that many never see coming.
 

Administration delays and the challenges of liquidity

South Africa’s estate administration system is under enormous strain, with billions in assets trapped in administrative limbo. What once took months now takes years, with even straightforward estates facing significant delays. For complex and high-value estates, these challenges are only compounded, even with the support of a professional.

High-value estates often come with intricate layers of ownership structures, cross-border assets and business interests, which means you have to navigate multiple tax jurisdictions, each with its own rules around primary residences, double taxation agreements, and offshore trust implications. In practice, families often find themselves unable to access their accounts, business succession plans stall, and property transfers remain stuck. Yet estate duty and capital gains tax obligations often require payment before you can even access these assets.
 

Tax obligations and the importance of preservation strategies

When someone dies, SARS creates a tax event that triggers multiple obligations all at once. Estate duty tax in South Africa starts at 20% on the first R30 million and rises to 25% on amounts above that, after a R3.5 million exemption. But that’s just the beginning. While assets left to a surviving spouse are exempt, this only defers the tax liability, creating an even larger obligation for the next generation once the surviving spouse dies.
 
Death also triggers a deemed disposal of all assets for capital gains tax purposes, and SARS treats everything as if it’s been sold at market value on the date of death. For substantial estates, this creates an immediate tax liability before the estate can be wound up. While certain exclusions exist – like the R2 million primary residence provision for CGT (excluding spouses who aren’t liable for CGT), and the R10 million small business asset lifetime limit – these exemptions are rarely enough of a buffer against the estate’s total tax bill. Combined, the burden of estate levy and capital gains taxes can easily consume up to 30-40% of an estate's value.

Consider, for instance, an estate valued at R200 million. Estate duty in South Africa alone could claim R6 million – R48.5 million on the first R30 million and R42.5 million on the remainder. Add potential capital gains tax on deemed disposals of business interests, investment properties, and share portfolios, and the total tax burden could easily reach R70-R80 million. Besides the immediate liquidity demands, you have to consider administrative costs, professional fees, ongoing business capital requirements, and family living expenses during what could be a prolonged administration period. That’s why it’s never been more important to plan for this reality in advance.
 

FAQs

How much is estate duty in South Africa?

South African estate duty is charged at 20% on the first R30 million of an estate's value, and 25% on amounts above that, after a R3.5 million exemption. This tax applies to assets transferred upon death, with certain exemptions available for surviving spouses and specific assets.

How can one reduce estate duty in South Africa?

To reduce estate duty in South Africa, consider strategies like using lifetime donations, establishing trusts, and investing in tax-efficient assets. Life insurance policies can also help cover estate duty costs. Additionally, proper estate planning, including leveraging exemptions and deductions, can minimise the overall estate duty liability.

Disclaimer

Disclaimer

The information contained in this video is intended for information purposes only and should not be regarded as financial advice.

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