> Home > Family Economics

Estate Planning With Children
Wills
Property Ownership

ESTATE PLANNING WITH CHILDREN

What is the age limit for a child to be considered a minor in estate planning terms?

Children are considered minors until they reach age 18.  Under Montana Uniform Probate Code, a child is eligible to collect their inheritance from an estate when they reach age 18.

What happens to inheritance and child care if only one parent dies?

Let’s assume that Mary and John Douglas have typical young-family estate-planning concerns. In their early 30s, Mary and John have two children, ages 5 and 7. Mary and John assume that if one of them died, the other would use family assets to provide for their children. They discussed the possibility that the survivor could remarry and have more children, and they still felt comfortable leaving everything to the survivor. Their estate-planning goals were accomplished by titling their car, house and investments in joint tenancies with rights of survivorship so that if either spouse died, the property would pass to the survivor. They also have named one another as beneficiary on their life insurance policies. (For more information on Property Ownership and Titling, Click Here)

Who should be named in my will to take care of my children?

A written will is a legal document used to nominate a guardian for minor children and a conservator of assets for them should both parents die.

What is the difference between and guardian and a conservator?

Guardianship provides for the children’s care until they reach the age of 18. The guardian has the power and responsibility of a parent and makes decisions about the child’s upbringing—schooling, religious training and medical treatment.

Conservatorship provides for management and distribution of money and property left to children until they reach the age of 18. One person can perform both functions, or one individual may be named as guardian and another as conservator.

What should I do if the person I nominated says “no” to being my children’s guardian and/or conservator?

Some friends or relatives may feel they cannot accept the added responsibility. If so, ask someone else. Attorneys recommend the naming of a backup guardian and conservator in case circumstances prevent your first choice from carrying out the obligation after your death.

How can I change the people (or person) responsible to serve as the guardian and conservator?

If you decide to change to another guardian or conservator, inform your current nominee. Then prepare either a new will or add a “codicil” (amendment) to your present will nominating the new guardian or conservator.

Since Montana law stipulates that minors receive their inheritance when they reach age 18, what can I do if I don’t think my children will be ready to manage their inheritance at that age?

You may believe your 18-year-old is bright but conclude that he or she is incapable of managing $100,000 or $200,000 in assets. Rather than leaving the assets directly to the children and nominating a conservator to manage them until the children reach age 18, you can have the assets left in a “family” trust for the children’s benefit. In your will you indicate which assets pass directly to the trust.  This is referred to as a testamentary trust.

The trust document states how you wish the money to be spent, who should be the trustee, and when the trust should terminate so assets pass to the children. The trustee has the responsibility of following your directions for health, education and support as outlined in the trust agreement. The trustee writes out the checks for the children’s living expenses, education and other costs. You can provide for trustee compensation if you feel the duties are fairly extensive. (For more information on Trusts, Click Here)

An alternative to a testamentary trust is a custodial account.  A custodial account is one alternative for a parent or other adult who wants to make gifts of assets during life, bequests with a will, or distributions from a trust for the benefit of a child who is under 21. An individual who transfers assets to a custodial account is referred to as a transferor. Although assets placed in the account are for the child, control is not transferred to the child until he or she reaches age 21.  A custodian manages the property that has been irrevocably transferred to a custodial account for the benefit of a child who is under the age of 21. The custodian can be the transferor (such as a parent or grandparent), another adult or a trust company.  The Montana Uniform Transfers to Minors Act applies to transfers of property to a child while a transferor is alive, as well as a transferor's bequest in a written will. If a custodianship is not used, children can gain access to their deceased parents' property at age 18.  The Act also pertains to distributions to a custodian from a trust arranged while the transferor is alive or from a trust established by the transferor's will.  (For more information on Custodial Accounts under the Montana Uniform Transfers to Minors Act, Click Here.)

How can I provide for a mentally handicapped child?

A mentally handicapped child could outlive both parents, so they need to plan for guardianship and management of assets for the child when they are gone.  There are several alternatives:

1. One alternative is to leave everything to your other children and instruct them to care for the mentally handicapped child. But you may decide that solution would be too burdensome to the other children.
   
2. Another alternative is to leave some assets outright to the non-handicapped children and some assets in trust to provide income for the support of the mentally handicapped child. A consequence of this decision may result in the mentally handicapped child being ineligible for need-based government benefits. In addition, the income could be claimed by the State of Montana for reimbursement if the handicapped child has to be in a state-supported care facility.
   
3. With help from their attorney, one family developed an estate plan that leaves their assets to a “spendthrift trust” for a child who has Down’s syndrome. Special wording in a spendthrift trust ensures that the assets will not be used in place of public benefits and that trust income will not make the handicapped child ineligible for government programs.
   
4. The Montana Self Sufficiency Trust (MSST) is a fund that generates income to purchase supplemental services for people with disabilities, without jeopardizing that person’s eligibility for government benefits. This private, nonprofit corporation, governed by a volunteer board of directors, was formed to take advantage of Montana law that allows for a cooperative venture between private individuals and the State of Montana to provide for the future of persons with disabilities and chronic illnesses.  Donors set up individual trust accounts that are pooled for investment purposes. Earned income is then transferred to the State Trust Fund. The State, through the Department of Health and Human Services, uses income from MSST to purchase supplemental services designated in the trust beneficiaries’ Lifecare Plans. For further information visit Parents, Let’s Unite for Kids at: http://www.pluk.org

How can I provide for my children from a previous marriage?

Parents who have children from a previous marriage may wish to assure that these children inherit property. One way this goal can be accomplished is by the parent keeping some property in his or her name only. The parents can then write separate wills or trusts to designate which children are to receive what assets and under what circumstances.

How can I be sure that my children receive certain personal items?

Nearly all parents have personal heirloom possessions they want to hand down to their children. The Montana Uniform Probate Code contains a provision allowing a person to refer in his or her will to a separate list disposing of tangible personal property such as rings, quilts, coin collections, and so on. The list cannot be used to dispose of cash, certificates of deposit, securities or any property that has legal title. The list is not part of the will but separate from it and must identify both the items and the persons to receive them with reasonable certainty. It must either be in the handwriting of the person who wrote the will or be signed by him or her. The separate listing can be changed as new possessions are added without the formalities required for new wills or codicils. The list should be dated and signed each time a change is made. (For more information on passing personal property, Click Here.)

Do we need to bother hiring an attorney if we only have minor children and a small estate?      

With their legal expertise, attorneys can help parents weigh advantages and disadvantages of various estate planning tools and techniques. Often the most difficult part of the planning is for the parents to discuss preferences for their minor children’s lifestyle, values, goals and relationships before they make their appointment with the attorney.

For more information on the answers presented in this section, Click Here to read MontGuide MT199117 HR entitled “Estate Planning for Families with Minor Children.

WILLS

What is a will?

A will is a written document that describes how its maker wants property distributed after his or her death. By making a will, an individual can decide who shall receive his or her property, how much each shall receive, when they shall own it and, to some degree, what they can do with it. A will has no effect during the testator's lifetime.

Who may make a will?

A person eighteen (18) or more years of age who is of sound mind and not under undue influence may make a written will.

Can a person make his own will?

Yes, a person can make his or her own will, but it must be in the testator's own handwriting. This type of will is called a holographic will. Such a will is valid if the signature and the material provisions are in the handwriting of the testator. Self-made wills, however, frequently increase costs and trouble for heirs. A handwritten will, just as any other, can be denied probate because of errors. Words used may not be interpreted by a court as intended by the testator.

Is a video-taped will valid in Montana ?

Verbal or video taped wills are not legally recognized by Montana law. However, some attorneys are video taping the signing and witnessing of a will to help demonstrate the testator was of sound mind and not under undue influence.

Why is it a good idea to hire a lawyer to aid in drafting a will?

In most cases, a lawyer can advise and assist a person in drafting a will that best suits his or her needs and one that avoids the legal pitfalls that can result from a "do-it-yourself" will. One should not rely on the advice of untrained relatives or friends who are not up to date on Montana laws regarding wills.

Must a will be witnessed?

A holographic (handwritten) will does not have to be signed by witnesses. Other wills must be signed by two persons who witnessed either the signing of, or the testator's acknowledgment of the signature or of the will. In all cases, the testator must sign the will. Generally none of the beneficiaries should be a witness. An heir could contest a will claiming that the beneficiary witness unduly influenced the will maker.

Can a will be changed?

A will can be changed or revoked during the maker's lifetime, as long as he or she remains competent. One way to change a will is to revoke the will and make an entirely new will. Another way to change a will is to make a codicil (a supplement) that must be executed (signed and witnessed) just like a will is. Marking out or adding words to a will are not effective ways to change it.

When should my will be reviewed?

A will should be reviewed periodically, especially when there are changes in family or financial situations. Such circumstances include, but are not limited to, the following:

• marriage, remarriage or divorce since the will was written
• birth of a child
• death of a devisee (beneficiary)
• naming different devisees (beneficiaries)
• naming a different personal representative
• moving to another state
• acquiring additional property
• changes in the title of property ownership
• passage of new Montana laws or federal estate tax laws
• increase in the value of property

Do I need to name a guardian for children?

Yes! In your will you nominate a guardian for the children and conservator of the assets. Guardianship provides for the children's care until they reach maturity. Conservatorship provides for management and distribution of the money and property left to children until they reach the age of maturity. One person can perform both functions, or you may name one individual as the guardian and another as the conservator.

For more information on dealing with minor children in estate planning, Click Here.

Is a will made out of state valid in Montana ?

A written will is valid in Montana if executed (signed and witnessed) according to Montana law, the law of the state or country where the will was executed, or the law of the place where, at the time of death, the testator is domiciled, has a place of abode, or is a national.

I want many of my personal possessions to go to many different people, how should my will deal with these possessions?

The Montana Uniform Probate Code contains a provision allowing a person to refer in his or her will to a separate listing which disposes of tangible personal property. Examples of tangible personal property would include rings, quilts, firearms and so on. The list cannot be used to dispose of cash, certificates of deposit, or securities. The list is not a part of the will but separate from it. The list must identify both the items and the persons to receive them with reasonable certainty. The separate listing can be changed as new possessions are added without the formalities required for new wills or codicils. The list should be dated and signed each time a change is made. For more information, read “Who Gets Grandma’s Yellow Pie Plate?”

What property cannot be disposed of by a will?

Property owned by two or more persons in joint tenancy with right of survivorship will be owned, after the death of one, solely by the survivor(s). Proceeds from insurance policies, pension funds, U.S. Savings Bonds, P.O.D. (payable on death) or T.O.D. (transfer on death) deposits or other assets where a beneficiary is named cannot be disposed of by a will unless the estate is named as a beneficiary.

Are there restrictions on disposing of property by a will?

One important restriction prevents a testator from depriving his or her surviving spouse of a share of the property. A surviving spouse may elect to take a percentage of the augmented estate. An augmented estate is the estate reduced by funeral and administrative expenses, homestead allowance, family allowances and exemptions, and enforceable claims to which is added the sum of property that was transferred by the decedent without adequate compensation.

Should a non-earner spouse have a will?

After the death of one spouse, the survivor's estate will include his or her own property and usually all or part of the deceased spouse's estate. Therefore, it is just as important for a non-earner spouse to have a will as it is for the primary breadwinner, and for many of the same reasons. It is important that wills of spouses be coordinated according to how title to property is held as well as for tax planning. For more information on Property Titling, Click Here.

Am I required to leave anything to my children in my will?

No. Children have no vested interest in their parent's property. If you have children, any or all may be disinherited. Parents do not have to leave a small sum such as a dollar to a child to show that he or she was not forgotten. Attorneys follow the practice of naming the children to show that the testator knew the "natural objects of his bounty" and had not forgotten any of them. Otherwise, a child could contest a will claiming that Dad was of unsound mind.  If a testator fails to provide in his will for any of his children born or adopted after the execution of his will, the omitted child may claim, under certain conditions, a share in the estate equal in value to that which he would have received if the testator had died without writing a will.

What is a self-proved will?

To make a will self-proved, an additional statement is added which states, in effect, that the testator and witnesses signed and acknowledged that this was the will. The testator and witnesses sign this statement before a notary who then signs and uses his or her official seal on it. This makes the will self-proving. When the will is submitted for probate, witnesses do not have to be present to testify concerning the execution of the will.

What are the differences between joint, mutual and contractual wills?

A joint will is one in which two persons express their testamentary dispositions in a single document. The intended result is the same as if each had made a will by a separate document. Unfortunately, as is witnessed by several cases which have found their way to the courts, the actual outcome in a joint will too often is not the same as was intended. A will is a sufficiently important document to merit the small amount of extra paper and effort necessary to make a separate one for each individual testator involved.

Mutual wills are the separate wills of two persons who have made reciprocal provisions for each other. For example, if a husband leaves all of his property to his wife by will and she, in turn, leaves all of her property by her will to him, their wills are said to be mutual. Some mutual wills are also joint wills.

According to the Probate Code, a contract to make a will or devise, or not to revoke a will, can be established only by: 1) provisions of a will stating the material provisions of the contract; 2) an express reference in a will to a contract and evidence proving the terms of the contract; or, 3) a writing signed by the decedent acknowledging the contract.

What is the effect of divorce, annulment or separation on a will?

Divorce or annulment revokes the disposition of property made by the will to the former spouse. A separation decree that does not terminate the status of husband and wife is not considered as a divorce under the Montana Uniform Probate Code. Any distribution made in a will to spouses who are legally separated pending divorce is still effective.

Is life insurance a substitute for a will?

No. Life insurance is simply one kind of property that may be owned. If insurance is payable to an individual named as a primary beneficiary or a secondary beneficiary, a will has no effect on the proceeds. However, if life insurance is payable to the estate, the will governs the distribution of the proceeds. Life insurance proceeds are subject to the claim of the creditors when payable to the estate, but not if they are payable to beneficiaries.

Is joint tenancy a substitute for a will?

No. Since the order of death and the amount of time between joint tenants' deaths will affect whose heirs receive the estate, joint tenancy is not a substitute for a will. In some cases and for certain types of property, such as residence shared by spouses, joint ownership may be useful as a legal tool in addition to a will. It results in property so owned "passing" directly to the surviving joint tenant upon the death of one or the other joint owners.  For more information on joint tenancy, Click Here.

What is a personal representative?

A personal representative is the person named in a will to carry out settlement of the estate (formerly the term "executor" was used). Any qualified person (competent, age of majority) can be nominated as personal representative. A testator nominates the personal representative. The District Court affirms the nomination by issuing letters of appointment. An individual need not be a resident of Montana to qualify as personal representative, although it may be more convenient to use a resident. A personal representative can reside in another state or even in another country. For more information on selecting a personal representative, Click Here.

Where should a will be kept?

After a will is drafted, it should be stored in a safe place where it can be found. If a bank or trust company is named as personal representative, the will may be left with the institution for safekeeping. Sometimes the attorney who drew the will can store it in his or her office safe. Although many people store wills in a jointly owned safe deposit box, careful consideration should be given to this choice. The joint tenant would have access to the box and could destroy the will if he or she would receive more under the laws of intestate succession. Montana law also provides for storage of a will with the district court. Contact the Clerk of the Court in the county where you live for the correct procedure for storing wills. For more information on the storage of important papers, Click Here.

What is the cost of having a will prepared?

Federal and state laws affecting taxation and estate planning have grown increasingly complex. The services of professionals fully competent in these fields are important. Attorney fees for legal assistance in making a will vary, depending on the size of the estate and the complexity of the will. Most law firms do not have a set fee for preparation of a will. Attorneys usually base their fee on the length of conference time with the testator and the amount of time it takes to draft the will. Do not hesitate to ask an attorney for an estimate of his or her fee for preparing a will, preferably at the first meeting.

For more information on the answers presented in this section, Click Here to read MontGuide MT198906 HR entitled “Wills."

PROPERTY OWNERSHIP

What types of property are recognized under Montana law?

There are two basic types of property real and personal. Real property is land and whatever is erected, growing on or affixed to it. Examples of real property include fences, buildings, water systems (unless removable), mineral deposits and standing uncut timber.

Personal property refers to assets whose ownership arises either out of physical possession of the property, or as the result of a document showing ownership. In Montana , all property except real property is personal property. Examples of personal property include livestock, machinery, stored grain, stocks and bonds, checking and savings accounts, automobiles and other transportation and recreational vehicles.

How many types of ownership methods are typical in Montana ?

Generally there are three basic forms of property ownership, sole ownership, joint tenancy, and tenancy in common.  But there are also business arrangements that include S and C corporations, partnerships, and limited liability corporations.

What is sole ownership?       

Sole ownership of property is property owned by a single individual. Except for some legal restraints, a sole owner may generally do as he or she pleases with the property during his lifetime, and may, by writing a will, designate its distribution after his or her death. If the sole owner does not write a will, the property is distributed according to the Montana Law of Intestate Succession.

What is joint tenancy?

Joint tenancy with right of survivorship is a form of co-ownership in which two or more persons own the same property subject to the other joint tenant's ownership right. When a joint tenant dies, his or her economic interest automatically passes to any surviving joint tenant or tenants. An example of typical wording on a document to create joint tenancy would be "to John Smith and Susan Smith as joint tenants with right of survivorship, and not as tenants in common."

Example: Ron and his brother Don own land as joint tenants with right of survivorship. Suppose Ron dies with a will that leaves his interest in the joint tenancy property to his son, Cory. The joint tenancy title prevails. Don receives Ron's interest in the land as the surviving joint tenant. Cory would not inherit his father's interest in the land, even though Ron's written will stated he wanted the joint tenancy property to pass to his son. If Ron owned the property as a tenant in common with his brother Don, then Ron could leave his half interest in the property to his son. Cory would then own half the property and his uncle Don would own the other half.

What is tenancy in common?

With this method of ownership, two or more persons hold undivided interests in the same property with no right of survivorship for the surviving tenant in common. "Undivided interest" means they each own a part of the total value. For example, one tenant in common cannot claim to own the valuable section of land with an oil well and claim the worthless section with sagebrush belongs to the other tenant in common.  Each tenant in common has the right to transfer his or her proportional share by selling it, giving it away, or by transferring it to persons of his or her choice at his or her death by a written will.

Example: Two brothers, Dan and Sam, own land they inherited from their parents as tenants in common. If Dan dies, his interest may pass by a written will to his wife and two children, not to Sam. If Sam dies, his interest may pass by a written will to his wife and children, not to Dan. In the event of Dan's or Sam's death, only the portion owned by the one who is deceased is subject to the federal estate tax. The land is valued at $800,000. Thus, if Dan dies, only his half of the tenancy in common property ($400,000) is included in his estate for federal estate computation purposes.

What happens if two Montanans who own land or financial accounts in joint tenancy die in the same accident?           

A statute passed by the Montana legislature provides a method of distribution of property held in joint tenancy whenever the last joint tenant fails to survive the other by 120 hours (five days). If this should occur, or if it cannot be determined whether one survived the other by 120 hours, one half of the property is distributed to the devisees, or heirs, of one joint tenant and one half to the devisees, or heirs, of the other joint tenant.  This statute applies unless the decedents have written wills that contain language dealing explicitly with deaths in a common disaster, or requiring that the beneficiary survive the testator (person who makes a written will), or survive the testator for a stated period, before receiving an inheritance under the will.

Example: Parent and child, John and his father, own property as joint tenants with right of survivorship. If they die within five days of one another, the property is divided one-half to John's wife because she is his survivor, and the other one-half to John's mother because she is the father's closest survivor.

What are some of the pitfalls of the joint tenancy form of ownership?

1. Disinheritance: By holding property in joint tenancy, a family could be disinherited.

Example: A father and son had farmed together for 15 years with all of the farm land in joint tenancy. They assumed that, upon the death of the father, the son would become the sole owner. But the unexpected happened the son was killed in an automobile accident leaving a wife and five children. The son's family was almost totally "disinherited" because the joint tenancy property passed to the father as survivor.

2. Loss of control:  If a parent holds title to real property in joint tenancy with his or her children, the parent loses control over his or her property. The parents can sell their interest, but it's doubtful if anyone would buy it under such circumstances.

Example: Jane, through her own efforts and those of her husband, now deceased, owns her own home. She was told by a friend that she could save estate taxes by placing the property in joint tenancy with her daughter. Jane now wants to sell the home because she is going to remarry and move to Florida . Jane's daughter "for her mother's own good" refuses to sell. Jane was unaware that her daughter would not have to pay an inheritance tax because the Montana legislature eliminated it for lineal descendants. The estate would not have to pay an estate tax, either, because the home’s value is under $2 million (2006). Consequently, Jane's reasons for placing the property in joint tenancy were the result of misinformation.

3. Hard feelings:  may develop if only one child's name is included on the property deed and other children are excluded. Upon the death of the parent, the property passes to the surviving joint tenant. The other children are "disinherited."

Example: Mrs. Jones placed title to the ranch with her son, requesting that after she's "gone" he would share it with his sister. After his mother's death the son refused to give any of the property to his sister. Legally he is not required to do so.

4. Misinformation: Parents who think they can avoid federal estate taxes by placing titles, checking and savings accounts, etc. in joint tenancy with their children are misinformed. The total amount will be included in the parent's gross estate, unless the children can prove that they contributed funds to the joint tenancy formation. 

Example: Nellie put her savings accounts totaling $100,000 in joint tenancy with her grandchildren, thinking she could avoid paying federal estate taxes on the amount. She was mistaken. The total was included in her gross estate. Since her total estate was under $2 million (2006) no federal estate taxes were due.

5. Passing property to the wrong person: Often an elderly person puts his or her checking account in joint tenancy with a relative or friend so that the person may write checks to pay bills, purchase food and clothing, or to pay funeral expenses after the elderly person has died. However, upon the death of the elderly person, the surviving joint tenant may claim the account as his or her own. This can disinherit others, perhaps contrary to the wishes of the deceased. Many lawsuits concerning estates have arisen out of such circumstances. A durable power of attorney, or authorization on the signature card for someone other than the owner of the account to sign checks, may be more preferable than joint tenancy.

  What are the advantages of joint tenancy ownership?

1. Joint ownership may be useful in passing property such as an automobile or home to the surviving owner conveniently and quickly.
2. A joint bank account with the right of survivorship may provide funds immediately for the maintenance of joint survivors.
3. The titles to property held in joint tenancy can be terminated by the personal representative or an attorney. Joint tenancy property does not go through probate.
4. Generally, (except between spouses), a gift tax liability arises when a joint tenancy is created with the separate funds of one of the joint tenants, and the other joint tenant contributes none or less than a proportionate share of the consideration. However, when a joint tenancy bank account is opened, another rule applies. When the noncontributing joint tenant makes a withdrawal of more than his or her portion of the contribution, a taxable gift occurs at the time of withdrawal.

For more information on property ownership, Click Here to link to MontGuide MT 198907 HR entitled, “Estate Planning, Property Ownership.”

Return to regular view	Text-only	Updated: 2/22/08