Managing Property Title Risks for Montana Farm/Ranch
Operators
Marsha A. Goetting, Professor and Extension Family Economics Specialist
James B. Johnson, Professor and Extension Farm Management Specialist
Duane Griffith, Assistant Professor and Extension Farm Management Specialist
Intergenerational transfers of farm/ranch assets may represent the most significant risk faced by
the seventy percent of farm/ranch families who do not have a written will. As a result, their real
property (i.e., farm/ranch land and buildings, home) and personal properties (i.e., equipment and
livestock) are distributed to their heirs by a combination of Montana contract laws and intestacy
statutes that may not be the way the owner would wish.
Additional risks include the potential payment of unnecessary taxes or probate fees, the sale of
land because heirs demand their inheritance in dollars, and assets passing to heirs who may have
no interest in farming or ranching. Family risks include the potential breakup of marriages,
family disagreements, and arguments that may carry over to subsequent generations.
Of the farms and ranches in Montana, 81 percent are legally organized as sole proprietorships
with 53 percent of the operators age 55 and older. Across the United States 90 percent of farms
are reported as sole proprietorships and 56 percent are age 55 and older (2002 Census of
Agriculture, Table 1).
To address the need for estate planning education for Montana farm/ranch operators, a grant was
awarded to Montana State University through the Western Center for Risk Management
Education for the 2004-2005 program year. This paper describes the project’s components and
the process utilized for the development and delivery of the educational program by the Montana
State University (MSU) Extension Service and partners.
Targeted Populations
One important group targeted for the program was the seventy percent of Montana farm/ranch
operators who do not have a written transfer plan. Another important target group was married
operators who want to explore succession alternatives that meet their goal of providing for a
surviving spouse while assuring that agricultural assets (i.e., land, equipment) will eventually
pass to the next generation.
An example of a targeted population member without a written transfer plan is a 55-year old
agricultural producer’s widow whose has assets valued under the federal estate tax exemption of
$1.5 million in 2005. She has three children, one who has stayed on the farm and two who are
married and live out-of-state. This widow has no written estate plan. She wants her children,
including the on-farm heir and his siblings in Nebraska and New York, to be treated "equally."
The on-farm heir realizes the operation does not produce enough income for him to eventually
buy out his siblings. The family living expenses of the on-farm heir are covered by the wife’s
income as a nurse at a local hospital. She has talked with her husband about reducing her
position to half-time so she can focus more of her efforts on raising their two-month old baby.
Page 2 of 11
The widow, as sole proprietor of the farm, is questioning her "equal" premise for the children
after watching the family feud that developed among the heirs on their neighbor’s farm. The
widow is interested in learning about what to include in a succession plan that will "make
everyone happy"--especially since she has developed a relationship with a gentleman she met
two years ago.
Another example of a targeted population member is a divorced ranch operator who has two
children from the dissolved marriage. He felt there was no need for he and his wife-to-be to
contact an attorney about a premarital agreement. Soon after the marriage ceremony he placed
his ranch (that will subject to federal estate tax because the value is in excess of $3 million) in
joint tenancy with right-of-survivorship with his new wife.
The rancher did not realize that by placing the land in joint tenancy with his new spouse, he has
disinherited his two biological children upon his death. He believes state law would provide for
his new spouse to receive one-third of the ranch and his children to receive the remaining twothirds. He did not realize that contract law takes priority over the Montana intestacy statutes
until he attended a MSU Extension seminar. Now he wants to learn about legal tools, such as a
life estate or a qualified terminable interests property trust, to determine if, or which one, could
better meet his succession planning objectives.
Project Partnerships
The first step taken by the MSU project team was to involve appropriate partners in the
development of this educational program and to determine the role of each.
Montana Grain Growers Association: The MSU Extension Service and Department of
Agricultural Economics and Economics has had an ongoing successful relationship with the
Montana Grain Growers Association (MGGA) through their Market Manager program. MGGA
has email contact and a monthly publication that encourages participation by their members in
management and marketing programs that would be valuable to them in their farm/ranch
operations. MGGA agreed to take the leadership role in facilitating an interactive video
conference seminar in February 2005.
Mountain States Beet Growers: The MSU Extension Service and Department of Agricultural
Economics and Economics also has had an ongoing successful partnership with the Mountain
States Beet Growers Association. Their leadership had indicated an interest in offering an estate
planning program during their four- state meeting in Billings. The Association agreed to host a
two hour pre-conference session on estate planning for interested members in January 2005.
State Bar of Montana: The MSU Extension Family Economics Specialist has had an ongoing
relationship with the State Bar of Montana since 1980 when she requested their review of lessons
for a study at home course on estate planning. Members of the Business, Estates, Trusts, Tax,
and Real Property Section of the State Bar have consistently conducted reviews of the fact sheets
(MontGuides) developed by the specialist on a pro bono basis. Members of the section agreed to
continue their legal review of materials developed during this project. In addition, the State Bar
provides a link to all twenty-seven MSU Extension estate planning MontGuides via its website:
http://www.montanabar.org.
Page 3 of 11
MSU County Extension Faculty: Additional partners for this project included the MSU County
Extension faculty who requested that an estate planning seminar be part of their educational
programs for the Eastern Montana Fall and Winter Series, Cabin Fever, and Spring Thaw. All
these educational programs were targeted to farm/ranch operators. The topic of estate planning
was initially requested for each educational event by members of their respective planning
committees.
Educational Programming Methods and Results
Interactive Video Conference: MGGA coordinated a two-hour estate planning interactive video
conference on February 9, 2005. Participants were asked to RSVP because of room size
limitations at the sites. The conference was broadcast to twelve Montana locations from the
MSU Burns Telecommunications Center. The range of participants was from ten each in Havre
and Wolf Point to forty-seven in Baker. While 115 signed up prior to the session, a total of 274
participants attended the video conference (Table 2).
Estate Planning Seminars: Each year Extension faculty in eastern Montana plan a Fall and
Winter Series of meetings. Estate planning was a topic that was featured at eleven of the
educational events. In January a five-hour estate planning class was included as a part of
Havre’s Cabin Fever program. The Young Ag Couples Conference in Helena during January
included a two-hour session on Transferring Property to the Next Generation. The Mountain
States Beet Growers Association meeting held a January pre-conference on estate planning.
Estate planning was one of the topics of the six-week series during the Granite County Herdsman
Workshops in Phillipsburg in February. Spring Thaw in Billings included a two-hour class on
estate planning in March. A total of 462 Montanans participated in these seventeen meetings
(Table 3).
Estate Planning Curriculum
The MSU Extension Service provides a packet to seminar participants “Estate Planning: the
Basics,” that contains twenty-seven MontGuides for a $10 cost recovery fee. Purchasers’ names
are placed on a mailing list to receive updates when there are changes in state and federal laws.
Currently, there are approximately 1,200 names on the list. MontGuides are also available on the
Web at no cost: http://www.montana.edu/extensionecon/publications/estate.html.
The titles, publication dates, and number of pages in each MSU Extension estate planning
MontGuide are provided (Table 4).
An Extension Program Assistant and the Extension Family Economics Specialist developed
additional fact sheets on qualified terminable interest property trusts (QTIP), bypass trusts, and
life estates. These fact sheets are currently under review for legal accuracy and adequacy by
members of the State Bar of Montana. After these materials are reviewed and revised, the fact
sheets will be sent to participants who attended the estate planning meetings from October 2004
through March 2005.
Newspaper articles on QTIP and bypass trusts and life estates will be provided through MSU
Communication Services to statewide agricultural newspapers and magazines. A special feature
Page 4 of 11
article will also be authored by a reporter who attended one of the sessions in January.
Participant Involvement Technique
During the past two years the MSU Extension Family Economics Specialist has experimented
with new teaching techniques for the topic of estate planning. The intent is to make the content
more interesting and more absorbable–in other words to provide opportunities for the
participants to become involved and focused during a two-hour to five-hour seminar.
After attending a state wide training session where innovative teaching techniques were
demonstrated she decided to try several to determine which ones would work for the serious
topic of estate planning. The term participant involvement describes the teaching technique now
utilized.
Vote on Topics. As participants enter the room they vote on the four most important topics out
of twelve by placing dots on topic sheets taped on a wall at the back of the room. One sheet
provides participants with the opportunity to list topics that were not identified and to ask
questions about additional topics.
Team Contest. After the start of the seminar/workshop participants are asked to divide into small
groups of three to five individuals. They are asked to select a team name and use a pad of sticky
notes to write answers to questions that will be asked throughout the session. During the time
that teams are discussing their responses to each question, the specialist often overhears
comments that are inaccurate and corrects mistaken perceptions during the answer session. Once
responses are placed on the board, the specialist quickly shares the team’s responses with the
total workshop group before showing the appropriate answer on a PowerPoint slide for the
question asked and providing additional content on the specific topic.
Benefits of the participant involvement technique are many. In the past the specialist found that
when questions were asked, few adult participants would respond because they did not want to
appear foolish or stupid. Within a group it is not an individual who is wrong...it may be the
whole group. This method provides participants with the opportunity to see that others may not
fully grasp all the concepts being presented as well and allows the specialist to re-emphasize
concepts not understood by the teams.
Illustration of Participant Involvement Technique for Teaching Content
Death taxes. Participants are always concerned about death taxes that they have heard will have
to be paid upon death of a property owner. A session often begins with questions about
inheritance and federal estate taxes.
Example question: What percent of Montanans paid an inheritance tax in 2003?
The responses from seminar participants this year have ranged from 100 percent to 2 percent.
The correct answer is zero. The Montana legislature eliminated the inheritance tax in 2001. Yet,
four years later most people remain uninformed about the new law. Many property owners are
still placing property in joint tenancy to avoid the tax because prior law eliminated the
Page 5 of 11
inheritance tax on assets placed in joint tenancy with family members.
Example question: What percent of Montanans paid a federal estate tax in 2003?
The responses this year ranged from 95 percent to 5 percent with the majority from 40 to 80
percent. The answer is two percent. Participants’ perceptions are vastly different than reality.
However, with the increasing farm and ranch land values in Montana, more will face such taxes.
Property titles. Most people do not realize they already have an estate plan. Most speakers
refer to such a plan as the “state’s plan” referring to the law of intestate succession that applies
when a person dies without a written plan. However, state contract laws also need to be
considered as the questions below demonstrate:
Example question: Tim and Sharon have titled their farm in joint tenancy with
right of survivorship. At this point they do not have children. They are in a car
accident. Tim dies immediately while Sharon passes away three days later. How
is their property distributed?
Some teams believe the State of Montana receive the property. However, the majority of the
seminar teams respond that the property passes to Sharon’s relatives as she is the one that lived
the longest. This response would be true if Tim and Sharon were residents of a state with
different survival requirements than Montana.
The answer is that one-half of the farm passes to Tim’s parents and the other one-half to
Sharon’s parents. Why? Montana provides a statute that provides if neither joint tenant survives
the other by 120 hours then the property is split equally between their heirs--in this case both sets
of parents.
Follow-up questions are posed to the seminar teams. What if Sharon lives until the 6th day and
then dies? Who receives the property? What if Tim lives until the 6th day and dies? Who
receives the property? Participants quickly see the need for Tim and Sharon to have a written
will. And, creative participants raise the issue of using life support systems to extend life and
thus, make a difference in whose relatives receive the property.
Program Outline
The content of the seminars/workshops varies depending on whether the program is two or fivehours and whether the participants are farm/ranch family members, wage/salary earners, or small
business owners. Below is a typical outline:
1. Consequences of how property is titled
Types of property–real and personal
Sole ownership
Joint tenancy with right of survivorship
Tenancy in common
Business arrangements (very brief given Montana has 81 percent sole
proprietorships)
Page 6 of 11
2. Contract Law
Payable on death (POD)
Transfer on death (TOD)
Beneficiary designations
Survival requirements
3. Dying without a will–who receives your property
Personal property–what state controls
Real property–location determines control
Single individuals
Married individuals without children
Married individuals with children
Grandparents with grandchildren and parents who predecease them
Simultaneous deaths–120 hour survival requirement
4. Written wills
Requirements for writing a will–sound mind and undue influence factors
Provisions for minor children–guardianships and conservatorships
Montana’s separate listing of tangible personal property
5. Revocable living trusts
Advantages and disadvantages
Taxable situation
6. Power of attorney
Montana statutes
Types–durable, springing, general,
7. Federal estate tax
What assets are included
Unlimited marital deduction–utilized in certain circumstances
8. Federal gift tax
Annual exclusions
Why not taxed to receiver
Evaluation Component
An evaluation survey instrument will be sent to each of this years seminar/ workshop participants
in April 2005. The goal of the evaluation is to determine what actions participants took as a
result of attending an estate planning session (i.e., writing a will and reviewing titles on property)
(Table 5).
Page 7 of 11
Table 1: Percentage of Farms by Type of Organization
Type of Farm
Montana
United States
80%
90%
Partnership
8%
6%
Corporation
10%
3%
2%
1%
100%
100%
Individual Family
Other-estate, trust, etc.
TOTAL
Source: 2002 Census of Agriculture
Table 2:
Montana Estate Planning Video Conference Participants
Participants
Signed Up
Site
1.
Baker
2.
Bozeman
3.
Actual #
Attended
0
47
35
39
Culbertson
5
16
4.
Geraldine
3
14
5.
Glasgow
14
22
6.
Glendive
15
19
7.
Great Falls
18
30
8.
Havre
6
10
9.
Lewistown
11
25
10.
Sidney
1
8
11.
Stanford
2
34
12.
Wolf Point
5
10
115
274 participants
GRAND TOTAL
Page 8 of 11
Table 3: Montana Estate Planning at Face-to-Face Seminars, Conferences and
Multiple Day Workshops, Attendance and Dates
Locations
Attendance
Date
Fall & Winter Series (11 locations)
Glasgow
53
October 25, 2004
Wolf Point
21
October 26, 2004
Scobey
18
October 26, 2004
Plentywood
30
October 27, 2004
Culbertson
26
October 27, 2004
Sidney
27
October 28, 2004
Circle
26
October 28, 2004
Forsyth
22
January 24, 2005
Jordan
16
January 26, 2005
7
January 26, 2005
Terry
43
January 27, 2005
SUBTOTAL
289
Miles City
Conferences (3 locations)
Montana Grain GrowersAssociation-Great Falls
December 2, 3004
44
Western States Beet
Growers-Billings
31
January 10, 2005
Young Ag Couples-Helena
40
January 14, 2005
SUBTOTAL
115
Multiple Day Workshops (3 locations)
Cabin Fever-Havre
31
January 6, 2005
Granite County Extension
Herdsman SchoolPhillipsburg
24
February 3, 2005
Spring Thaw-Billings
20
March 9, 2005
SUBTOTAL
85
GRAND TOTAL
478 participants
October 2004-March 2005
Page 9 of 11
Table 4: MSU Estate Planning MontGuides
Title
Number
Date
# of Pages
www.montana.edu/wwwpb/pubs/mt200301.html
MT200301HR
July 2003
4
Annuities
www.montana.edu/wwwpb/pubs/mt9213.html
MT199213HR
January 2005
4
Cremation
www.montana.edu/wwwpb/pubs/mt200201.html
MT200201HR
August 2002
8
Custodial Accounts for Kids Under Age 21
www.montana.edu/wwwpb/pubs/mt9910.html
MT199910HR
January 2000
4
Designating Beneficiaries Through Contractual
Agreements
www.montana.edu/wwwpb/pubs/mt9901.html
MT19901HR
October 2003
8
Dying Without a Will in Montana: Who
Receives Your Property?
www.montana.edu/wwwpb/pubs/mt8908.html
MT198908HR
February 2004
8
Estate Planning for Families with Minor
Children
www.montana.edu/wwwpb/pubs/mt9117.html
MT199117HR
January 2005
4
Federal Estate Tax
www.montana.edu/wwwpb/pubs/mt9104.html
MT199104HR
October 2002
8
Getting Started with Estate Planning
www.montana.edu/wwwpb/pubs/mt9508.html
MT199508HR
May 2003
4
Gifting: A Property Transfer Tool for Estate
Planning
www.montana.edu/wwwpb/pubs/mt9105.html
MT199105HR
October 2002
8
Glossary of Estate Planning Terms
www.montana.edu/wwwpb/pubs/mt200202.html
MT200202HR
November 2002
4
Inheriting an IRA: Planning Techniques for
Primary Beneficiaries
www.montana.edu/wwwpb/pubs/mt200310.html
MT200310HR
October 2003
8
Inheriting an IRA: Planning Techniques for
Successor Beneficiaries
www.montana.edu/wwwpb/pubs/mt200311.html
MT200311HR
October 2003
4
Letter of Last Instructions
www.montana.edu/wwwpb/pubs/mt8904.html
MT198904HR
October 2003
2
Life Insurance: An Estate Planning Tool
www.montana.edu/wwwpb/pubs/mt9211.html
MT199211HR
October 2002
4
Accessing a Deceased Person’s Financial
Accounts
Page 10 of 11
Table 4: MSU Estate Planning MontGuides, continued
Title
Number
Date
# of Pages
Medicaid and Long-Term Care Costs
www.montana.edu/wwwpb/pubs/mt9511.html
MT199511HR
March 2004
8
Montana Rights of the Terminally III Act
www.montana.edu/wwwpb/pubs/mt9202.html
MT199202HR
January 2004
4
Montana Estate Taxes
www.montana.edu/wwwpb/pubs/mt200105.html
MT200105HR
January 2003
4
Non-Probate Transfers
www.montana.edu/wwwpb/pubs/mt9509.html
MT199509HR
August 2003
4
Personal Representatives
www.montana.edu/wwwpb/pubs/mt9008.html
MT199008HR
January 2000
4
Power of Attorney
www.montana.edu/wwwpb/pubs/mt9001.html
MT199001HR
January 2003
4
Probate
www.montana.edu/wwwpb/pubs/mt9006.html
MT199006HR
September 2002
4
Property Ownership
www.montana.edu/wwwpb/pubs/mt8907.html
MT198907HR
October 2003
4
Revocable Living Trusts
www.montana.edu/wwwpb/pubs/mt9612.html
MT199612HR
October 2002
4
Selecting an Organizational Structure for Your
Business
www.montana.edu/wwwpb/pubs/mt9708.html
MT199708HR
November 1998
4
Who Get’s Grandma’s Yellow Pie Plate?
Transferring Non-Titled Property?
www.montana.edu/wwwpb/pubs/mt9701.html
MT199701HR
November 2003
4
Wills
www.montana.edu/wwwpb/pubs/mt8906.html
MT198906HR
October 2003
4
Estate Planning: The Basics $10.00
Not Available to Download-Packet Format
EB0144
May 2002
N/A
Transferring Your Farm or Ranch to the Next
Generation $2.00
Not Available to Download-Bulletin Format
EB0149
February 2000
18
Page 11 of 11
Table 5: Participants’ Actions Resulting from Attending Estate Planning Seminar/Workshop
Yes
No
Does not
Apply
1. Discussed estate planning objectives with my spouse or family
members.
2. Learned Montana law would distribute my property the same way I
would.
3. Discovered Montana law would not distribute property according to
my wishes and my situation.
4. Reviewed titles on some or all of my real and personal property and
found no changes were necessary.
5. Reviewed titles on some or all of my real and personal property and
made necessary changes in the titles.
6. Wrote my will in my own handwriting for the first time.
7. Reviewed my existing handwritten will and made changes.
8. Reviewed my existing handwritten will and found no changes were
necessary.
9. Had a will drawn up by an attorney.
10. Reviewed my existing will drawn up by an attorney and had him/her
make changes.
11. Decided a will was not necessary for my situation at this time.
12. Wrote a list of tangible personal property naming who should
receive my specific personal items.
13. Reviewed my list of tangible personal property and made any
necessary changes.
14. Decided a list of tangible personal property was not necessary for
my situation.
15. Reviewed my life insurance coverage and made any necessary
changes.
16. Have no need for life insurance coverage in my situation.
17. Decided a trust did not fit my situation (do not have one and do not
plan to have one).
18. Reviewed my existing trust agreement and made changes.
19. Reviewed my existing trust agreement and found no changes were
necessary.
20. Decided a gift giving program didn’t fit my situation
21. Started gifting property to my children or other relatives.
22. Reviewed my existing gift giving amounts and made changes.
23. Learned my estate is not large enough that Federal taxes would be
due.
24. Estimated the Federal estate taxes, if any, which would be due on my
present estate if I should die today.
File: Kansas city paper 031505