                               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 - - Taxability
                                           Tax and
- Trusts 27-31 (1934); - - Annot., 36 A.L.R.2d 917,
of                       See also,
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. - at 152-57, 199 P.2d at 860-862. All questions
            Id.
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.
