When a natural person (taxpayer) dies, that person is called a ‘deceased person’ and all his or her assets on date of death will be placed in an estate. This estate is called an estate of a deceased person (commonly known as a ‘deceased estate’). Assets in a deceased estate can amongst other things include immovable property (house), movable property (car, furniture, etc), cash in the bank, etc. The person who administers a deceased estate is called an ‘Executor’. Once the Executor has finalised all the administration in the deceased estate, the remaining assets (after paying all the debts) will be distributed to the beneficiaries.
A beneficiary can consist of either heirs and/or legatees. A legatee is a person who receives a specific asset from the deceased estate. An heir is a person who receives the balance of the estate (that is, after all disposals to a legatee are finalised).
Who is liable for Estate Duty?
It is normally the responsibility of the Executor to pay the duty as levied on the property of the deceased. However, there are instances in which the estate duty is payable directly by the person who is receiving the property. For example, where a policy is payable directly to a beneficiary, the Estate Duty attributable to such policy is payable by the beneficiary (in other words, this portion of the Estate Duty will not be paid by the deceased estate).
Can the executor be held personally liable for estate duty?
The executor is personally liable for the estate duty payable in his or her representative capacity if:
- The estate duty liability remains unpaid and the executor disposes of the amounts in respect of which the estate duty is due; or
- an executor disposes of funds that he or she possesses in a representative capacity or that came into his or her possession after the estate duty liability is due and the funds could legally have been applied to settle the estate duty liability.
An exception to the general rule is that an executor cannot be held personally liable for the estate duty liability in respect of an asset over which the executor had no control.
If you have any queries in this regard please do not hesitate to contact us in this regard.