Montana does not charge an inheritance tax, nor does it tax the estates of decedents who were residents of the state or who owned property within its borders. In this detailed guide to Montana’s inheritance laws, we break down intestate succession, probate, taxes, what makes a will valid and more. If you’d like professional guidance on your estate planning, or just need help investing your inheritance, you can work with a financial advisor.
Does Montana Have an Inheritance Tax or Estate Tax?
While there are no inheritance taxes in Montana, it’s important to note that if you inherit property from someone who lived in a state that does levy an inheritance tax, there’s a chance you may be responsible for paying it. Montana is also one of 38 states without an estate tax, at least for deaths that occur after 2005. For deaths that occurred before 2005, the estate may still be subject to an estate tax.
While they are similar, there are some key differences between estate taxes and inheritance taxes. Also called the death tax, estate taxes are taken out of the deceased’s estate immediately after their passing, while inheritance taxes are imposed upon the deceased’s heirs after they have received their inheritance.
There’s no gift tax in Montana, either, but keep in mind that the federal gift tax is applied once an individual is gifted more than $15,000 in one calendar year. As for other taxes, property taxes are low and there is no sales tax, but Social Security benefits and other forms of retirement income are taxed.
Other Necessary Tax Filings
While there isn’t a specific inheritance tax in the state of Montana, that doesn’t mean there won’t be any taxes that you’ll have to pay, however. Here are some things that you may want to be aware of when it comes to tax you may owe for inheriting an estate.
- Potential state estate tax: Montana may impart an estate tax on deaths that occurred prior to 2005. In this case, the estate must file a Montana Income Tax Return for Estates and Trusts.
- Inheritance tax from another state: While Montana does not have an inheritance tax, if you inherit an estate from someone living in a state that does impart these taxes (like Iowa or Kentucky), you will be responsible for paying them.
- Federal estate tax: Regardless of the state in which you reside, the federal estate tax is applied if an inherited estate is more than $11.58 million in 2020. This is only taxed on the overage, not the entire estate, but the rate can be as high as 40%.
To file any of these estate-based returns, you’ll need to apply for an employer identification number (EIN) with the IRS. You can do this online, by fax or via mail.
Dying With a Will in Montana
Leaving behind a valid will and testament is always the best way to ensure that your estate is distributed according to your wishes upon your death, regardless of your state’s intestate succession laws.
Dying with a valid will and last testament in place is referred to as dying testate while dying without a valid will and last testament is called dying intestate. Dying intestate means your estate will be subject to your state’s succession laws. It could even be forced to pass through probate, which could be a lengthy and expensive process.
In Montana, the requirements for a valid will include: the testator (the person who created the will) being at least 18 years old, of sound mind, the will must be signed by the testator and two witnesses, it must be in writing, and it must name of a beneficiary. An estate skips probate in Montana if it’s less than $50,000. Avoiding the probate process could be beneficial for an estate’s heirs, as the probate process in Montana can be long and expensive.
Montana’s probate process can either take the form of Informal probate, which takes place outside the court when no disputes are anticipated; and supervised formal probate, in which the entire process takes place under court supervision. Some estates in Montana may also be exempt from the probate process altogether. Montana also adheres to the Uniform Probate Code, a standardized set of probate procedures used across 15 states.
Dying Without a Will in Montana
Die without a valid will and last testament in Montana and the distribution of your estate will be subject to the state’s intestate succession laws. It may also be subject to the probate process which, as discussed, can be both lengthy and expensive.
In Montana, if you did intestate, your assets go to your next closest living relative, though that depends on whether you leave behind a surviving spouse, children, or other living relatives.
However, there are some assets that are exempt from intestate succession laws, such as property in a living trust, life insurance policies, retirement accounts, payable-on-death bank accounts and real estate that is transfer-upon-death.
Spouses in Montana Inheritance Law
Montana is an equitable distribution state, not a community property state, and it recognizes common law marriages. Spouses are generally entitled to your estate according to state succession laws, but how much depends on whether the deceased leaves behind other living relatives, such as parents or children.
Die with a surviving spouse and no parents or children or other descendants, and your spouse inherits your entire estate. And if you leave behind a spouse and descendants with that spouse, your spouse also inherits everything.
Die intestate with a spouse, descendants with that spouse and your spouse has children from another relationship, your spouse gets $150,000 of your estate plus 1/2 of the balance. Then your descendants inherit everything else.
If you leave behind a spouse and children with someone other than that spouse, your spouse gets $100,000 of your intestate property plus 1/2 of the balance, while your descendants get everything else. Leave behind a spouse and parents, and your spouse inherits the first $200,000, plus ¾ of the remaining estate. Your parents inherit the rest.
Children in Montana Inheritance Law
If you die intestate in Montana, your children are entitled to part of your estate, depending on if you also leave behind a spouse, how many children you have, and if you have children with someone other than your spouse. Die with children but no surviving spouse and your children inherit everything. But if you die with a surviving spouse and children with that spouse, your spouse inherits everything – as long as your spouse has no other children.
However, if you leave behind a spouse and descendants, and your spouse has children with someone else, your spouse inherits the first $150,000 of your estate, plus ½ the balance. Your descendants inherit the rest. If you leave behind a spouse and children with someone other than that spouse, your spouse inherits $100,000 of your intestate property plus 1/2 of the remainder while your children inherit everything else.
And as with many states, children are only eligible to receive part of their intestate assets if they are legally recognized children by the state of Montana. So, they have to be adopted, born within marriage, or born outside of marriage if a marriage later occurred or paternity was established. Grandchildren are also eligible to receive a share.
Intestate Succession: Spouses and Children
|Inheritance Situation||Who Inherits Your Property|
|Spouse, but no children or living parents||– Entire estate to a spouse|
|Spouse and children with that spouse||– Spouse inherits everything,|
|Spouse and children with spouse and someone other than a spouse||– Spouse gets $100,000 of your intestate property plus 1/2 of the remainder. Children inherit everything else.|
|Spouse and children with spouse and spouse have children from a previous relationship||– Spouse gets $150,000 of the estate, plus 1/2 of the balance. Your children get everything else.|
|Spouse and parents||-Spouse inherits $200,000 plus 3/4 of the balance. Parents get the rest.|
Unmarried Individuals Without Children in Montana Inheritance Law
If you are unmarried and die without a valid will and last testament in Montana, then your entire estate goes to any surviving children in equal shares, or grandchildren if you don’t have any surviving children. If you die intestate unmarried and with no children, then by law, your parents inherit your entire estate. If your parents are no longer living, your siblings inherit your estate in equal shares.
It’s worth noting that these succession laws are only enacted in the case of an intestate estate. If a valid will and last testament are in place, it takes precedence over a state’s succession law.
Intestate Succession: Extended Family
|Inheritance Situation||Who Inherits Your Property|
|Children, but unmarried||– Entire estate to children|
|Parents, but no spouse, children, or siblings||– Entire estate to parents|
|Parents are deceased, but no spouse or children||– Estate split among siblings in equal shares|
Other Situations in Montana Inheritance Law
There are some other situations in Montana inheritance law to keep in mind. For example, in order to inherit a portion of your estate, an heir must outlive you for 120 hours. And if an heir was conceived before you died but born after you died, that person is still entitled to their portion of your estate. Half relatives are treated the same as whole relatives, and an heir’s immigration status does not affect the right to inherit a portion of your estate.
Like many states, Montana names some property that is exempt from intestate succession laws. Property in a living trust, life insurance policies, retirement accounts, payable-on-death bank accounts and real estate that is transfer-upon-death all bypass probate.
The Bottom Line
There isn’t a specific inheritance tax in the state of Montana. That doesn’t mean that you won’t be responsible for some tax, though, especially if your primary residence is in another state. It’s important to work with a tax professional to make sure you properly account for the taxes you owe, and to help you save where you can.
Tips for Estate Planning
- Managing your own estate, or handling the intricacies of inheriting money from the estate of a loved one, can get complicated. That’s why many people choose to work with a financial advisor. If you don’t currently have a financial advisor, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Regardless of what state you live in, you may also want to make sure you understand all of the federal tax requirements for inheriting an estate.
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