Do I pay CGT when I inherit shares or another investment?

Direct answer

Do not assume that receiving inherited shares or another investment automatically creates a personal CGT payment, or that no tax question exists until you sell. SARS's CGT information includes inheritance guidance, and its deceased-estate guidance makes the executor responsible for the deceased person's tax affairs. The safe practical approach is to obtain the estate records, preserve the value and transfer evidence, and seek advice before reporting a later sale.

An inheritance has two separate stages: the estate administration and your later ownership. Keeping them separate avoids a common error, where a beneficiary uses a current portfolio value instead of the estate documents when preparing a future CGT calculation.

What this means in practice

Ask the executor for a proper handover file. It should identify the asset, number of shares or units, estate valuation date, value used by the estate, transfer date and evidence that you became entitled to the holding. A broker statement showing the asset in your name is useful, but it may not explain the inheritance event or valuation.

Do not sell quickly without downloading this information. After a sale, it can be hard to reconstruct an unlisted-share valuation, historic corporate action or the estate's records. Store the documents outside the broker's messaging system as well as in your tax file.

The tax position may be different where the asset came from a foreign estate, trust, company, retirement arrangement, a spouse, a deceased person married in community of property or an estate that has not been finalised. This article cannot determine the CGT point, estate-duty position or base cost for each case. It helps you create the evidence file that a practitioner needs.

Step-by-step

1. Confirm the legal transfer.

Keep the executor's letter, relevant will or distribution record and broker transfer confirmation. Do not rely only on a family email.

1. Request the estate valuation record.

Ask for the valuation date, basis and supporting document. Record the asset identifier, quantity and any restrictions or corporate actions.

1. Separate estate events from your own transactions.

Make a schedule that distinguishes the inherited holding, post-transfer dividends or income, additions, withdrawals and any later sale by you.

1. Preserve all later acquisition and disposal evidence.

If you reinvest dividends, buy more units or participate in a corporate action, save those records with the inherited-asset file.

1. Obtain advice before a disposal.

Give the estate documents and your current records to a tax practitioner before accepting a sale offer, redemption or transfer to a family member.

1. Retain the completed return trail.

Keep the calculation, ITR12, ITA34 and SARS correspondence for the later filing period.

Documents and records to keep

• Executor appointment, distribution or transfer evidence and broker confirmation.
• Estate valuation, supporting schedules and asset identifiers.
• Corporate-action notices, later purchases and later sale contract notes.
• A timeline distinguishing estate and beneficiary events.
• CGT calculation and completed SARS return records.

Important limits and exceptions

This is not estate-distribution advice and does not say that every inherited holding has the same tax treatment. The executor's obligations, the estate's tax affairs, the type of asset, foreign connections and marital-property rules can all matter. A beneficiary should not invent a base-cost figure or use an online market price as an estate valuation.

If you received an asset from a trust, company, retirement fund or offshore estate, identify that fact clearly. The legal source of the asset may be different from a direct inheritance under a will. Ask for tailored advice before filing any CGT entry or transferring the holding again.

When to get tailored advice

Get advice for material investments, unlisted shares, foreign holdings, a delayed estate, an estate dispute, a quick onward sale or a missing valuation. TaxProof can help build the evidence schedule, while an executor, estate specialist and tax practitioner should deal with the legal and tax analysis.

Related TaxProof guides

• What records prove CGT base cost?
• How do I calculate CGT when selling listed shares?

Sources

• SARS, Capital Gains Tax
• SARS, FAQs on Deceased Estates