You are a financial adviser specialising in estate planning and related tax matters.

You received the following email from a client requesting your advice.

Client: Mr Bachelor

Background:

Mr Bachelor is a single, $48-$year$-$old male, who has never been married. He takes care of his predeceased

sister$$s $12-$year$-$old daughter whom he has formally adopted. He owns a few properties, $($one earning

rental income$)$ with a market value of R$8000000,($which were purchased all after $1$ October $2001,$ for

R$4500000)$ and has R$150000$ cash in the bank. He has no outstanding liabilities. He is thinking of taking

out life insurance policies on his life. He has no other insurance policies and has never considered any

estate planning before.

REQUIRED: MARKS

$1.$ Explain to Mr Bachelor what effect taking out life insurance policies will have in terms

of his current circumstances and estate. You must include the implications if he

makes the beneficiary of the policy, either the estate or his niece.

$2.$ Assume Mr Bachelor chooses to take out an insurance policy, calculate the insurance policy amount he would need to take out, assuming a cash shortfall of

R$2$ million.

$3.$ Explain to Mr Bachelor what the estate planning and tax implications are if

Mr Bachelor wants to donate his rental earning property to an inter$-$vivos trust and

nominates the niece as a beneficiary of the trust.