1. 1 Managing Property Title Risks for Montana Farm/ Ranch Operators Western Center for Risk Management Education

2. 2 Marsha A. Goetting n Professor & Extension Family Economics Specialist n Department of Agricultural Economics & Economics

3. 3 James B. Johnson n Professor & Extension Farm Management Specialist n Department of Agricultural Economics & Economics

4. 4 Duane Griffith n Assistant Professor & Extension Farm Management Specialist n Department of Agricultural Economics & Economics

5. 5 Partnerships –Western Center for Risk Management education –Montana Grain Growers Association – Mountain States Beet Growers –State Bar of Montana – Msu Extension Faculty

6. 6 Educational Methods n Interactive Video Conference n Seminars

7. 7 Interactive Video Conf. n MSU Burns Telecommunications Center n February 9, 2005 n 2 to 4 PM n 115 preregistered n 274 attended

8. 8 Table 2: 12 Sites: n Bozeman n Lewistown n Glendive n Sidney n Glasgow n Culbertson n Baker n Wolfe Point n Great Falls n Havre n Geraldine n Stanford

9. 9 Fall & Winter Series—Table 3 n 11 locations n October 2004 n January 2005 n Total = 289 participants

10. 10 Conferences-Table 3 n Montana Grain Growers—Great Falls n Western States Beet Growers—Billings n Young Ag Couples— Helena n Total = 115 participants

11. 11 Multiple Day Workshops—Table 3 n Cabin Fever: Havre n Spring Thaw: Billings n Granite County Herdsman School: Phillipsburg n Total = 75 participants

12. 12 Estate Planning: the Basics—Table 4 MSU Extension--$10 Mailing List Updates

13. 13 27 MontGuides www.montana.edu/extension econ/publications/estate.html

14. 14 Program Outline — n Content u Farm/ranch family members u Wage/salary earners u Small business owners

15. 15 Evaluation—Table 6 n What actions did participants take as a result of the program?

16. 16 Participant Involvement Technique for Teaching Content

17. 17 n Estate Planning Team Contest u Valuable prizes !!!

18. 18 n Decide on: Team Name Feisty Critters Team Name

19. 19 Take turns--Team Runner n Sticky Notes ò Write team name & answer on sticky note each time you respond to question FeistyCritters 50%

20. 20 Question n What % of Montanans paid an Inheritance tax in 2003?

21. 21 Montana Inheritance Tax 0 %

22. 22 Question n What % of Montana deceased persons’ estates paid a federal estate tax in 2003?

23. 23 Federal Estate Tax n 2003--8,426 deaths u 189 paid n 2 %

24. 24 Planning Technique Die in appropriate year!!!

25. 25 Estate Tax Exclusions & Credits

26. 26 “Who” Gets Your Property When You Die????

27. 27 Property passes by: n Contract Law n Written Will n Montana Law of Intestate Succession n Trust Agreement

28. 28 Contracts n Examples u Life insurance u Annuities u IRAs u KEOGH

29. 29 Life Insurance n Bill n Vere

30. 30 Beneficiary n Bill has $100,000 life insurance policy n Designates Vere as primary beneficiary

31. 31 Bill’s Will n “I bequest all life insurance proceeds to my son, Chris Shelton.”

32. 32 Who gets $100,000? n Vere? n Bill’s son, Chris?

33. 33 $100,000 Life Insurance Proceeds n Vere n Contractual u Designated Beneficiary

34. 34 Payable on Death Designation (POD) n At death ownership passes to POD beneficiaries n No probate

35. 35 Transfers on Death (TOD) Registration n Stocks n Bonds

36. 36 Sole ownership Mother 1/2 Dad 1/2 Single Guy/Gal

37. 37 What fraction, if any, will brother receive? No will

38. 38 ? Right of Representation

39. 39 Question n What % of Montana farm/ranch operations are titled in sole proprietorships/ family?

40. 40 Business Arrangements-- 2002 Census, Montana Sole proprietorship/family 81% Partnership 8% Corporation 10% Estates/trusts, other 2% *over 100% due to rounding *over 100% due to rounding

41. 41 Married Couple n John & Mary farm (land, equipment, etc) John’s name only

42. 42 Auto Accident n John dies first n Mary dies 3 days later

43. 43 Question n Who receives the property?

44. 44 Who Receives? n John dies first n Mary dies 3 days later

45. 45 Whose relatives receive????? n John dies first n Mary dies 3rd day n John’s relatives receive property

46. 46 Montana Survival Requirement n An heir must survive 120 hours u Otherwise, treated as predeceasing the decedent

47. 47 What if ??? n John dies first n Mary dies 6 days later n Mary’s relatives receive property

48. 48 Sole Ownership n John & Mary need a written will F if they want to control who receives the property

49. 49 Parents have 3 children

50. 50 Question: What fraction, if any, does grandchild receive? ?

51. 51 Survivors : 3 children

52. 52 Survivors: two children & grandchild

53. 53 Survivors : one child & grandchildren

54. 54 Survivors : One child & grandchildren ?

55. 55 Survivors : Grandchildren

56. 56 JOINT TENANCY Real Property

57. 57 JOINT TENANCY n On death of either, survivor takes all

58. 58 JOINT TENANCY

59. 59 Husband dies: Survivors, wife surviving joint tenant; his children

60. 60 Wife dies with all property

61. 61 Remarriage with husband as joint tenant husband

62. 62 Couple: property in joint tenancy n Tim n Sharon

63. 63 Joint Tenancy n Tim dies first n Sharon dies 3rd day

64. 64 Question???? n Who receives the property?

65. 65 Joint Tenancy n Tim dies first n Sharon dies 3rd day

66. 66 If no children n 1/2 Tim’s parents n 1/2 Sharon’s parents

67. 67 Survival Requirement Joint Tenancy n If neither joint tenant survives the other by 120 hours, property is split equally among their heirs

68. 68 Survivor lives beyond 120 hrs n Tim dies first n Sharon dies 6th day

69. 69 Property Distribution-- Sharon dies on 6th day All to Sharon’s parents

70. 70 Survivor lives beyond 120 hrs n Tim dies 6th day n Sharon dies first

71. 71 Property Distribution: Tim survives Sharon beyond 120 hours All to Tim’s parents

72. 72 Consequences of joint tenancy n All to Tim’s parents n All to Sharon’s parents n 1/2 to Tim’s parents & 1/2 to Sharon’s parents

73. 73 Dad & Son: Property in Joint Tenancy

74. 74 Both Married n Dad has wife n Son has wife

75. 75 Truck Accident n Dad dies first n Son dies 3rd day

76. 76 Team Question n Who receives the property?

77. 77 Truck Accident n Dad dies first n Son dies 3rd day

78. 78 Property Distribution n 1/2 dad’s wife n 1/2 son’s wife

79. 79 Survivor Lives Beyond 120 Hrs  Dad dies first n Son dies 6 th day

80. 80 Property Distribution-- son Dies on 6th Day All to son’s wife

81. 81 Survivor Lives Beyond 120 Hrs n Dad dies 6 th day n Son dies first

82. 82 Property Distribution: Dad Survives Son Beyond 120 Hours All to dad’s wife

83. 83 Consequences of Joint Tenancy n All to dad’s wife n All to son’s wife n 1/2 to dad’s wife & 1/2 to son’s wife

84. 84 JT Title reads n John Doe and Mary Doe as Joint Tenants with Right of Survivorship and not as Tenants in Common

85. 85 What is the value of John’s estate for Federal Estate Tax purposes? u $1,000,000 Revocable Living Trust u $ 100,000 Saving Bonds/POD Wife u $ 150,000 Joint Tenancy/Son u $ 250,000 Life Insurance Policy u $ 500,000 Tenancy in Common with Wife

86. 86 Gross Estate: Property owned by decedent Real estate, stocks, bonds, bank accounts, personal property, personal effects, assets in revocable living trust Real estate, stocks, bonds, bank accounts, personal property, personal effects, assets in revocable living trust

87. 87 Value included Fair market value at date of death

88. 88 Team Question n Value of John’s estate? u $1,000,000 Living Trust u Included

89. 89 Team Question n Value of John’s estate? u $100,000 Saving Bonds/POD Wife u Included

90. 90 Team Question n Value of John’s estate? u $150,000 Joint Tenancy/Son u Included, unless contribution shown

91. 91 Team Question n Value of John’s estate? u $250,000 Life Insurance Policy u Included

92. 92 $1.5 Million Estate $250,000 Policy 2005 Parent Owned

93. 93 Parent Owned Policy-2005

94. 94 $1.5 Million Estate 2005 Child Owner of Policy

95. 95 Federal Estate Taxes -- $250,000 policy n Adult child as owner of policy save $112,500

96. 96 Team Question n Value of John’s estate? u $500,000 Tenancy in Common with spouse u $250,000 included

97. 97 What is the value of John’s estate for Federal Estate Tax purposes? u $1,000,000 Revocable Living Trust u $ 100,000 Saving Bonds/POD Wife u $ 150,000 Joint Tenancy/Son u $ 250,000 Life Insurance Policy u $ 500,000 Tenancy in Common with Wife ($250,000) 1,750,000 Value of estate

98. 98 John’s Estate Value = $1,750,000 Exclusion$1,500,000 ***$112,500 due in tax

99. 99 Sole Ownership-- n Surviving spouse who takes unlimited marital deduction

100. 100 $3 Million Estate (2005)-- Unlimited Deduction

101. 101 Wife: $3 Million 2005

102. 102 Develop Estate Plan n Objectives u Minimize taxes u Make sure property gets to the children

103. 103 Plan A: n Dad leaves Mom amount equal to applicable exclusion n Remainder to kids

104. 104 Use Dad’s Applicable Exclusion on 3M Estate

105. 105 Mom’s Estate

106. 106 Plan B: n QTIP Trust u Amount of exclusion/credit

107. 107 Use Dad’s Applicable Credit on 3M Estate

108. 108 Mom’s Estate

109. 109 Estate Size $3,000,000 n Tax Savings With Planning u $710,000

110. 110 Written Will n n MT 198906

111. 111 Question n What % of Americans die without a written will?

112. 112 7 out of 10 do not have a will

113. 113 Age influence n 50 - 54 44% n 70 - 74 75% n 80 + 85% AgePercent

114. 114 Heinrich Heine Made his wife sole beneficiary on the condition that she remarry because then “there will be at least one man to regret my death”

115. 115 “To my son I leave the pleasure of earning a living. For 25 years he thought the pleasure was mine. He was mistaken.” Dad’s Will

116. 116 Fees n Personal Representative n Attorney u “reasonable compensation”

117. 117 Question n What is the maximum fee (in dollars) allowed by Montana law to an attorney to settle a $200,000 estate?

118. 118 Personal Representative Fee Based on Value of Estate n 3% of first $40,000 n 2% excess $40,000

119. 119 Attorney 1 1/2 times allowable to personal 1 1/2 times allowable to personal representative representative

120. 120 Probate Compensation $200,000 estate n P R $4,400 n Attorney $6,600

121. 121 Hourly Fee Basis n Based on time involved in settlement of estate n Ask attorney about method used

122. 122 Probate Compensation $1,000,000 estate n P R u $20,400 n Attorney u $30,600

123. 123 Federal Gift Tax

124. 124 Question n What is the amount that can be gifted yearly without a federal gift tax?

125. 125 Annual Gifts $11,000 n To as many people as you wish n Tax free

126. 126 Gift-splitting n Spouse may join in gift $22,000

127. 127 Marsha A. Goetting MSU Extension Family Economics Specialist P. O. Box 172800 Montana State University Bozeman, MT 59717 406-994-5695

128. 128 Marsha A. Goetting goetting@montana.edu