SECTION A $(20$ MARKS$)-$ PARAGRAPH QUESTIONS

Answer the following questions:

Question $1(8$ marks$)$

Read the scenario below and answer the questions that follow.

Mr M passed away recently. He was the founder of the MNO Trust, a discretionary inter vivos trust.

In terms of Mr M$\text{'}$s Will, he bequeathed his share portfolio, valued at R$3$ million, to the MNO Trust, subject to the lifelong usufruct of his spouse, Mrs M$.$

The Trust owns a life insurance policy on Mr M$\text{'}$s life, with a death cover value of R$6$ million. The premiums paid by the MNO Trust until Mr M$\text{'}$s death, plus $6\%$ compound interest, amount to R$120000.$

$1\mathrm{.}1$ Discuss how the policy on Mr M$\text{'}$s life will be treated in his estate for estate duty purposes. Motivate your answer with reference to the relevant legislation.

$1\mathrm{.}2$ Discuss who will be liable for the payment of the Estate Duty, if any, on the life insurance policy on Mr M$\text{'}$s life. Motivate your answer with reference to the relevant legislation.