In terms of calculating estate duty, the first R3.5 million of the value of the estate is not subject to tax. If the deceased is the first-dying spouse, he can roll-over this abatement to the surviving spouse who will then have an R7 million estate duty abatement on her death. In addition, where the deceased bequeath assets to his surviving spouse (including proceeds from a domestic life policy) no estate duty will be charged on the applicable assets.
Step 1: Add up all of the property and deemed property of the deceased individual to give you a gross value of the estate of the deceased.
Step 2: Deduct the following from the property and deemed property:
Funeral costs and deathbed expenses; outstanding debts of the deceased; usufruct or fideicommissum; general administration expenses; valuation fees; certain foreign property; bequests to public benefit organisations; improvements to property; maintenance claims; items/amounts that are inherited by a surviving spouse. The balance that remains is the net value of the estate of the deceased.
Step 3: Subtract The Abatement
An abatement of R3.5 million can be deducted from the net value of the estate in terms of Section 4A of the Estate Duty Act. (It is an abatement that is afforded all deceased persons to reduce the value of their estates after death.)
The balance that remains is the dutiable estate for estate duty purposes. (In other words, the balance here is what you will pay estate duty on.)