Montgomery GI Bill Improvement Act of 1987

Montgomery GI Bill Improvement Act of 1987 - Amends Federal veterans' benefits provisions to revise the amount of the monthly deduction to be taken from the basic pay of a member of the armed forces who does not make an election not to participate in the armed forces basic educational assistance program (thereby, in effect, electing to participate in such program). Provides the amount of such deduction as either $100 per month for 12 months or $60 per month for 20 months. Changes the time period in which an individual entering into active duty must decide whether to participate in such program from the time one first enters into active duty to a period established by the Secretary of the military department concerned, but not to exceed 60 days after the individual first enters into active duty. Makes identical changes (in both the monthly deductions and the time frame for making the election) for members of the Selected Reserve of the armed forces. Allows an individual who first elected not to participate in the program to still enroll in such program within the 60-day time limit.

Adds a new chapter to Federal veterans' benefits provisions relating to the transfer of such educational assistance entitlements to the dependents of an individual in the armed forces. Provides that the Secretary of the military department concerned (the Secretary) may authorize a military member entitled to such basic educational assistance benefits to transfer to one or more of their dependents all or part of such member's assistance entitlement. Allows such transfer to be revoked by such individual at any time. Directs the Secretary and the Administrator of Veterans Affairs to prescribe regulations for the administration of the transfer of such assistance between members and their dependents. Provides that a dependent to whom assistance is transferred is entitled to the same benefits as the former holder, except that such assistance may only be provided: (1) while the individual continues on active duty; or (2) upon the death, discharge for hardship or service-connected disability, or completion of 20 years of active duty by the individual. Outlines administrative provisions relating to the transfer of such assistance benefits to two or more eligible dependents. Requires the person to whom assistance is transferred to be a child or spouse of the member of the armed forces at the time when the benefits would otherwise be paid.

Provides for the payment in compensation (rather than educational benefits) for an individual who was entitled to such benefits but has become so physically or mentally disabled that he or she is unable to utilize such assistance. Provides for payment (in a certain priority for estate purposes) to the living survivors of the remaining amount of educational assistance of an individual who dies before utilizing all of his or her entitled educational assistance.