Are funeral costs deductible from Estate Duty?

Yes. Under Section 4 of the Estate Duty Act, reasonable funeral and tombstone expenses can be deducted from the gross estate, lowering the amount of tax payable.

Does my estate pay my debts after I die?

Yes. All your personal debts (mortgages, credit cards, personal loans, and unpaid taxes) must be settled by your Executor before any heirs can inherit. These liabilities are fully deductible from your Gross Estate for tax purposes.

Are Executor fees deductible from Estate Duty?

Yes. The fees charged by the Executor (up to the legal maximum of 3.5% plus VAT on the gross assets) are considered allowable administration costs and are deducted before Estate Duty is calculated.

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Liabilities & Allowable Deductions

Last Updated for the 2026/2027 Tax Year

Key Takeaways: Reducing the Tax Burden

The Net Value: You are only taxed on what is left after all your debts, administrative fees, and specific bequests are subtracted from your gross estate.
Every Debt Counts: Mortgages, credit cards, and even your final income tax bill to SARS are fully deductible liabilities.
Admin is Expensive: Executor fees, Master's fees, and property valuation costs eat into the inheritance, but they do lower your final Estate Duty bill.

Once your Executor has tallied up your Gross Assets and Deemed Property, the next legal step is to subtract everything you owe. Section 4 of the Estate Duty Act outlines exactly what expenses and debts can be used to shrink the dutiable value of your estate.

1. Liabilities (The Debts You Leave Behind)

Death does not wipe away your debt. Your estate is legally responsible for settling all outstanding balances before your heirs receive a cent. The silver lining is that these debts reduce your overall Estate Duty liability.

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Mortgages and Bonds The outstanding balance on any home loan or commercial property bond on the date of death. (Remember: The full market value of the house goes under Gross Assets; the bond goes here under Liabilities).

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Personal Debts & Credit Credit card balances, vehicle financing, personal loans, overdrafts, and outstanding medical bills.

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Taxes Owed to SARS Any income tax or provisional tax you owed up until the date of your death is considered a liability.

The Hidden Liability: Capital Gains Tax (CGT)

Death triggers a "deemed disposal" of your assets. SARS treats it as if you sold all your property and shares on the day you died. If those assets grew in value during your lifetime, your estate must pay CGT on that profit (subject to a R440,000 exclusion in the year of death). This resulting CGT bill becomes a massive liability that must be paid out of the estate's cash reserves.

2. Allowable Deductions (The Cost of Dying)

Winding up an estate is a legal process, and it isn't free. The Estate Duty Act allows you to deduct the costs associated with your death and the administration of your assets.

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Funeral & Deathbed Expenses Reasonable costs for the funeral, cremation, or burial, as well as the cost of a tombstone. It also covers terminal illness medical expenses not covered by medical aid.

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Executor & Administration Fees The Executor is entitled to a maximum of 3.5% (plus 15% VAT) on the gross value of the assets they administer. You can also deduct Master's fees, newspaper advertisement costs (for creditors), and banking fees for the estate's late account.

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Valuation & Transfer Costs The costs of hiring sworn appraisers to value property, antiques, or private business shares. Conveyancing fees for transferring a property out of the deceased's name can also be deducted if required by the administration process.

3. Exempt Bequests (Section 4 deductions)

Finally, if you leave money or assets to specific people or entities, SARS allows you to deduct that exact value from your estate.

The Surviving Spouse [Section 4(q)]: Any asset left to a legally recognized surviving spouse is 100% deductible. Read more about the Spousal Exemption.
Charities & PBOs [Section 4(h)]: Any bequest made to an approved Public Benefit Organisation (like an orphanage, animal welfare, or university) is fully exempt from Estate Duty.

Scenario: Finding the Net Value

The Situation: Sarah dies leaving a Gross Estate of R6,000,000. She is unmarried. She has a R1,500,000 mortgage on her house, R50,000 in credit card debt, and her funeral costs R40,000. The Executor charges R200,000.

Step 1: Tally the Deductions & Liabilities

Liabilities (Bond + Credit Card): R1,550,000
Deductions (Funeral + Executor): R240,000
Total to Subtract: R1,790,000

Step 2: Find the Dutiable Estate

Gross Estate: R6,000,000
Less Total Liabilities & Deductions: -R1,790,000
Net Value: R4,210,000

Less Standard Section 4A Abatement: -R3,500,000
Dutiable Value: R710,000

Sarah's estate only pays the 20% tax on the final R710,000, resulting in an Estate Duty bill of R142,000 to SARS.

Pro Tip: The Liquidity Crisis
Liabilities are a double-edged sword. While a R1.5m mortgage reduces your tax bill, the Executor still has to settle that R1.5m with the bank in cash. If there isn't enough liquid cash in the estate to pay the debts and the Executor fees, the Executor will be forced to sell the family home on an auction. Always calculate your cash shortfall.

This guide is provided for educational purposes by the team at Cape Town Lawyer. Negotiating executor fees or complex CGT liabilities requires a qualified fiduciary professional.

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