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Article by Attorney Nanika Prinsloo - listed on our sister site Find an Attorney

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When a person has died, estate duty must be calculated.  This is done by adding together all property and deemed property that a person owned. Property consists of all the physical assets that a person owned:  house, car, furniture, clothing, and other assets that can be valued.  Certain items that the deceased did not actually own but where he/she had an interest in, is deemed as his/her property.  Deemed property is, for example, domestic insurance policies on the life of the deceased, no matter who owned these policies. Once the property and deemed property of the deceased were added together, and after certain deductions and an abatement, the value of the person’s estate is determined and on that amount estate duty is calculated.  

This article is about the exclusions from life policies on the life on the deceased as deemed property.  There are three policies which will not be included as deemed property in the estate of a deceased person to calculate estate duty.  Or put otherwise, if a life policy is one of the three policies discussed here, no estate duty will be paid on such a policy.

As mentioned, deemed property is, inter alia, all policies on the life of the deceased person, whether that deceased person was the owner or beneficiary of the policy or not.  If the policy was however a key man policy; a buy-and-sell policy or a policy that was taken out and donated in terms of an ante-nuptial (before marriage) or post-nuptial (after marriage) agreement, then such a policy will not be regarded as deemed property of the deceased.

These three policies will be discussed seperately.


A key man policy is where a policy was taken out by a company (for example) on the life of their director (key employee) in case the director dies and the company suffers a financial loss.  Such a policy is taken out by the company out of its own accord (meaning that the director did not apply for the policy him/herself). The proceeds of the policy must go to the company directly upon the death of the director and not to the director’s estate.  As mentioned, all life policies form part of the deemed property of a deceased person’s estate, but if the policy is a key man policy, then it does not form part of the deceased’s estate. 

To qualify for the key man policy exemption, the policy must not be taken out at the instance of the deceased;  nor must the deceased have paid any of the premiums; nor must any relative of the deceased receive any of the proceeds of such a policy. 


A buy and sell agreement is for example where there is a partnership and the partners enter into an agreement which determines that upon the death of one of the partners, the remaining partners can buy out the share of the deceased partner.  This type of agreement can also be entered into between directors of companies or members of Close Corporations.  This buy and sell agreement will normally be backed by a buy and sell policy, which will mean that the proceeds of the policy will be used to buy out the deceased partner’s/director’s/member’s interest in the business.  The policy must have been taken out for the purpose to buy out the interest of the deceased person, or a part of the interest, otherwise the policy will not be exempt from deemed property and will be included in the estate of the deceased person. 

The deceased must not have paid any of the premiums of the policy. If a deceased has paid premiums on a buy and sell policy, it is regarded as deemed property of the deceased and will not qualify for an exemption, although SARS will sometimes allow the policy to be exempt. 

There are certain other exemptions with regards to buy and sell policies which will not be allowed here.


Persons who get married and wish to marry out of community of property will enter into an ante-nuptial agreement which is drafted by a Notary and properly registered.  In this ante-nuptial agreement the parties can agree to anything but in general they agree on what happens with assets when there is a divorce or in the case of death.

A post-nuptial agreement can also be entered to for any reason, but also the parties can enter into an agreement of settlement during a divorce.

In these agreements it can be determined that a policy will be taken out by either spouse and that the proceeds of the policy will be paid to the surviving spouse.  If it is such a policy that was taken out by the deceased, the proceeds of such a policy will not be regarded as deemed property in the estate of the deceased.

The policy must be taken out because of the ante- or post-nuptial agreement.  It is not necessary that the policy must have been taken out when the agreement is drafted.  The policy can be taken out afterwards and the exemption from deemed property will still apply to the proceeds of the policy. 

Section 3(3)(a) specifies that the proceeds of such a policy must be payable/paid to a surviving spouse or child of the deceased.  If such a child or spouse predeceased the deceased or if the child or spouse cede the policy to a third party, the exemption will not apply and the policy will be regarded as deemed property of the deceased.

When the deemed property is calculated, the above three types of policies, if they qualify with all the requirements for each, will not be calculated as part of deemed property and will simply be ignored.  All other policies will be included as deemed property.\

This article written by Nanika Prinsloo of Prinsloo & Associates Attorneys.