NO. 86-332 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

IN THE MATTER OF THE ESTATE OF 

JAMES J. WINTER 

APPEAL FROM: District Court of the Second Judicial District, 

In and for the County of Silver BOW, 

The Honorable Arnold Ol.sen, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Hon. Mike Greely, Attorney General, Helena, Montana 

Clay R. Smith, Asst. Atty. General, Helena 

For Respondent: 

William M. Kebe, Jr., Rutte, Montana 

Submitted on Rriefs: Dec. 31, 1986 

Decided: March 5, 1987 

k&L/ 

Clerk 
Mr. Justice William E. Hunt, Sr. delivered the Opinion of the 

Court. 

The Montana Department of Revenue (DOR) appeals the 

order of the District Court, Second Judicial District, County 

of Silver Bow, determining the amount of inheritance tax 

computed upon the estate of James Winter, deceased. 

We reverse. 

DOR raises two issues on appeal: 

1. Whether DOR is barred from issuing an amended 

certificate of inheritance tax by § 72-16-402, MCA, laches or 

estoppel? 

2. Whether an inheritance tax is computed based upon 

the distribution scheme of the probated will or of the 

will-contest settlement agreements? 

James Winter died on March 17, 1983, in Butte, Montana. 

The personal representative of the estate, Rita Harrington, 

filed a petition for formal probate of the decedent's will in 

the District Court on March 24, 1983. The will, dated 

February 1, 1983 bequeathed $1,000 to each of the decedent's 

four living grandchildren and the remainder of the estate to 

Mrs. Harrington, decedent's niece. Objections to the formal 

probate of the February, 1983 will were filed by Michael 

Hirschberg, one of the decedent's grandchildren, and Marie 

Richardson, a non-relative of the decedent. Mr. Hirschberg 

and Mrs. Richardson had jointly initiated a probate 

proceeding in Utah on March 21, 1983, based on a will of the 

decedent dated March 4, 1978. The 1978 will appointed Mrs. 

Richardson as personal representative, bequeathed $5,000 to 

Mrs. Harrington and Mrs. Richardson's husband, and the 

remainder of the estate to the decedent's grandchildren. 
On April 15, 1983, the District Court entered an order 

admitting the 1983 will to probate, finding that this will 

had not been revoked and was in a11 respects valid. On that 

same date, Mrs. Harrington and Mr. Hirschberg executed an 

agreement whereby Mr. Hirschberg consented to the probate of 

the 1983 will and Mrs. Harrington agreed to assign and 

transfer to him one half of her net distributive share due 

under the 1983 will. A second agreement was entered into 

between Mrs. Harrington and Mrs. Richardson, whereby Mrs. 

Richardson was recognized as a joint tenant in three savings 

accounts of the decedent and whereby she also withdrew her 

Utah petition for the probate of the 1978 will. 

In November, 1983, Mrs. Harrington submitted an 

application to DOR for a determination of inheritance tax 

due. The application distributed the shares of the estate 

according to the terms of the 1983 will and the settlement 

agreements. A copy of the 1983 will was received by DOR on 

December 6, 1983. On December 8, a DOR tax examiner called 

the attorney for the estate and inquired about the difference 

between the distribution set forth in the will and the 

distribution set forth in the application. The attorney 

explained that the application's distribution scheme was 

based in part on the settlement agreements, and he thereafter 

mailed a copy of the agreements to DOR. 

The District Court issued a decree of distribution and 

an order approving final account of the estate on April 16, 

1984. On April 19, the DOR issued a certificate of 

inheritance tax due based on the following calculations: 
Distributive Net Taxable Amount 

Distributee Share Exemption Share of Tax 

R. Harrington $50,214.32 $1,000.00 $49,214.32 $2,937.15 

M. Hirschberg 50,214.32 7,000.00 43,214.32 1,278.57 

J. Hirschberg 1,000.00 7,000.00 - - 

P. Hirschberg 1,000.00 7,000.00 - - 

S. Hitchman 1,000.00 7,000.00 - - 

M. Richardson 27,080.00 - 27,080.00 2,332.80 

$6,498.52 

[sic (exemption amounts) ] 

On April 20, the estate's attorney telephoned the DOR 

tax examiner and objected to the inclusion of the entire 

amount of Mrs. Richardson's joint savings account as taxable, 

adding that the estate would not pay the additional amount of 

tax. The tax examiner notified her supervisor of this 

conversation, and the supervisor thoroughly reviewed the 

files for the estate. This review of the files led the 

supervisor to believe that the distributive scheme of the 

will, rather than the distributive scheme of the settlement 

agreements, should control the incidence of inheritance tax 

liability. A revised findings for the amount of inheritance 

tax due was completed, and an amended inheritance tax 

certificate was issued May 18, 1984. The amended certificate 

apportioned tax liability as follows: 

Distributive Net Taxable Amount 

Distributee Share Exemption Share of Tax 

S. Hitchman $ 1,000.00 $1,000.00 $ - $ - 

M. Hirschberg 1,000.00 1,000.00 - - 

J. Hirschberg 1,000.00 1,000.00 - - 

P. Hirschberg 1,000.00 1,000.00 - - 

M. Richardson 24,380.56 - 24,380.56 1,950.44 

R. Harrington 102,128.08 690.00 $101,438.08 9,230.09 

$ 11,180.53 

The estate appealed the amended certificate to the 

District Court. The court held that DOR was in violation of 

72-16-402, MCA, which states DOR "shall with reasonable 
diligence" ascertain the amount of inheritance tax due. By 

failing to act with reasonable diligence, DOR was estopped 

from amending its certificate of inheritance tax liability. 

The court also held that the inheritance tax should be based 

upon the distributive share actually received, rather than on 

the share set forth in the 1983 will. 

The District Court found DOR's issuance of the amended 

tax certificate was barred by laches. The court reasoned 

that since DOR had in its possession a copy of the settlement 

agreement since December 9, 1983, its decision to amend the 

amount of the tax due was not reasonably diligent. 

Laches is negligence in the assertion of a right; "it 

exists when there has been unexplained delay of such duration 

or character as to render the enforcement of the asserted 

right inequitable." Montgomery v. First National Bank of 

Dillon (1943), 114 Mont. 395, 408-09, 136 P.2d 760, 766, 

(quoting Riley v. Blacker (1915), 51 Mont. 364, 370, 152 P. 

758, 759) . We hold that the doctrine of laches is not 

applicable to the case at bar. 

A review of the record discloses an ongoing conflict 

with the correct determination of inheritance tax. Mrs. 

Harrington first submitted an application for determination 

of inheritance tax to DOR in November, 1983. In December, 

1983, upon seeing the discrepancy in the distribution under 

this application and the decedent's will, DOR requested a 

copy of the settlement agreement upon which the application's 

distribution was based, as well as proof of any contribution 

made by Mrs. Richardson to the joint savings accounts. 

Mrs. Harrington sent DOR an amended application in 

March, 1984. This amended application revised certain 

deductions relating to the administration of the estate, but 

did not revise the distributive shares. At the same time, a 

deposit of $3,634.20 was made to the county treasurer, who 
issued a receipt which left blank the final amount of taxes 

due. On April 16, 1984, the District Court issued a decree 

approving final account of the estate and finding that all 

the inheritance tax due had been paid. On April 19, 1984, 

DOR issued its inheritance tax certificate determining that 

$6,498.52 was owed, with a balance due of $2,673.05. Upon 

receipt of the certificate, the attorney for the estate 

telephoned DOR and stated that the estate would not pay the 

additional amount of tax due. This telephone call prompted 

DOR to review and revise its files concerning the estate, and 

one month later DOR issued its amended inheritance tax 

certificate. 

We do not think that the passage of 30 days between the 

issuance of the first tax certificate and the amended tax 

certificate constitutes a lack of reasonable diligence. Upon 

notification by the attorney for the estate that the estate 

would challenge DOR's determination, DOR promptly began a 

review of its files. This review led to the discovery of an 

error in calculation of the tax due, and an amended 

certificate was promptly issued. However, we would caution 

both parties on remand and in the future to calculate their 

figures more carefully. 

The second issue raised by DOR is whether an inheritance 

tax is computed according to a probated will or a 

will-contest settlement agreement. We note that there are 

two prevailing views in this country. The majority view is 

that an inheritance tax is based on the manner of 

distribution provided for in the will, while the minority 

view holds that the tax is based upon the settlement 

agreement subsequently entered into among the beneficiaries. 

See generally, Kidder, State Inheritance -- Tax and Taxability 

- of Trusts 27-31 (1934); -- See also, Annot., 36 A.L.R.2d 917, 

921-932 (1954). The policy behind the majority view is that 
taxation based upon the probated will prevents the 

beneficiaries from conspiring against the state to deprive it 

of tax monies to which it is entitled by law. The minority 

view holds that it is more equitable to tax property based 

upon its actual distribution. 

We adopt the majority view. In Montana, an inheritance 

tax is a tax upon the right to receive property, rather than 

a tax upon the property itself. In Re Kohr's Estate (1948) , 

122 Mont. 145, 151, 199 P.2d 856, 859. The inheritance tax 

accrues at the same time the interests of the beneficiaries 

vest, the interests having vested upon the death of the 

decedent. - Id. at 152-57, 199 P.2d at 860-862. All questions 

concerning tax must therefore be determined as of the date of 

the decedent's death. Burr v. Dept. of Revenue (1978), 175 

Mont. 473, 475, 575 P.2d 45, 47. The right of the State to 

an inheritance tax vests immediately upon the decedent's 

death. - Id. This right cannot be annulled or abridged by any 

subsequent agreement between the beneficiaries of the estate. 

Compromise agreements may be entered into by the 

beneficiaries but such a compromise does not impair the 

rights of the taxing authorities who are not parties to the 

agreement. Sections 72-3-131 (2) and 72-3-915 (I), MCA. 

The District Court, in its opinion incorrectly adopting 

the minority view, relied on In Re Thorson's Estate (Minn. 

1921), 185 N.W. 508, 509, where the Minnesota Supreme Court 

held: 

The legatee who yields up a portion of his legacy 

in consideration of the settlement and to avoid 

litigation must be deemed as renouncing his legacy 

to the extent shown by the settlement, leaving the 

amount thereof a part of the estate, and those who 

receive it, whether by formal decree of the court 

[or! by settlement standing alone, should pay the 

tax thereon. 
However, the District Court's analogy of renunciation to 

settlement agreements is misplaced. The procedure for 

renunciation in Montana is clearly set forth in 5 72-2-101, 

MCA, and it provides that the person renouncing his or her 

interest may not direct to whom the interest will devolve. 

R.enunciation of succession is distinct and separate from 

will-contest settlement agreements. Renunciation is not 

controlling in this case since the parties did not follow the 

procedure set forth under 5 72-2-101, MCA. 

The majority view that inheritance tax follows the will 

rather than the actual distribution of property favors the 

State as the taxing entity in this case. However, today's 

ruling is a double-edged sword which cuts two ways. In the 

event that a probated will distributes property to 

individuals or organizations exempt from taxation, a 

subsequent agreement which distributes property to 

individuals or organizations subject to taxation will work to 

the State's detriment. In order to quell future disagreement 

on this point, we find it beneficial to adopt the uniform 

policy that. inheritance tax be computed on the basis of the 

probated will. 

The order of the District Court is reversed, and the 

case is remanded for a final account of inheritance tax due 

consistent with this opinion. 
Justices 

Mr. Justice John C. Sheehy did nct participate in this decision.