Elandri Brecher
Attorney specialising in Debt Review, General Litigation, Wills & Deceased Estates, Family, Commercial, Contract, and Labour Law.
What Happens When Someone Dies?
When a person passes away, their assets and liabilities are consolidated into what is known as a deceased estate. An executor, appointed by the Master of the High Court, is responsible for identifying assets, paying creditors and ultimately distributing the remaining estate to beneficiaries.
One of the executor's key responsibilities is ensuring that the deceased's tax affairs are brought up to date. SARS must be notified of the death, and all outstanding tax returns must be submitted before the estate can be finalised.
What Can SARS Claim?
Many people assume that tax obligations end when a person dies. This is not the case — SARS is entitled to recover any taxes that remain unpaid, along with any interest and penalties that have accrued.
Taxes SARS may claim from a deceased estate
- Outstanding income tax
- Capital gains tax
- Value Added Tax (VAT)
- Estate duty
- Interest on unpaid taxes
- Penalties on unpaid taxes
The tax compliance process within a deceased estate is typically overseen by a qualified tax practitioner working together with the executor. The tax practitioner assists in ensuring all outstanding returns are submitted, liabilities correctly calculated, and all SARS requirements met.
Does SARS Get Paid Before Beneficiaries?
Yes. Before beneficiaries can receive their inheritance, all creditors must be paid from the estate. SARS is regarded as a creditor, and its claims must be settled before assets can be distributed.
Tax Clearance Required
The executor must obtain confirmation from SARS that the deceased's tax affairs are in order. Without this clearance, administration of the estate cannot be completed.
Creditors Paid First
All creditors — including SARS — must be settled before any assets are distributed to beneficiaries, regardless of what the will specifies.
Beneficiaries Receive the Remainder
Only once all tax obligations and other debts have been resolved can the remaining assets be distributed to the rightful heirs.
This means that even where a will clearly identifies beneficiaries and specifies how assets should be distributed, inheritance can be delayed until all tax obligations have been addressed.
What If the Estate Does Not Have Enough Money?
In some instances, the debts of the deceased exceed the value of the estate. This is known as an insolvent deceased estate. Where an estate is insolvent, assets may need to be sold, and creditors are paid according to a prescribed legal order.
Beneficiaries will only inherit if there are sufficient funds remaining after all creditors, including SARS, have been paid.
Why Professional Assistance Matters
Delays in resolving tax matters with SARS can significantly prolong the winding up of an estate and delay distributions to beneficiaries. It is therefore essential that both the executor and the appointed tax practitioner work closely together throughout the administration process.
Final Thoughts
While inheriting from a deceased estate may seem straightforward, SARS has a legal right to recover outstanding taxes before any assets are distributed. Executors must ensure that all tax obligations are settled and that SARS is satisfied before beneficiaries receive their inheritance.
Understanding these requirements can help families avoid unnecessary delays, disputes and financial surprises during an already difficult time.
Hammond Pole Attorneys — Deceased Estate Administration & Succession Planning