Kentucky Inheritance Tax Law
Chapter 140 of the Kentucky Revised Statutes governs Kentucky inheritance taxes. The Kentucky state government taxes the receipt of property based on the beneficiary's relationship with the decedent. The decedent is the person who died and left property to other people. The beneficiary is person receiving the property. When a person dies without leaving a written will, under the law that person is referred to as having died "intestate." Conversely, when a person dies with a legal will, then that person has died "testate." The property distributed at the decedent's death is referred to as an "estate." Inheritance tax is the tax on the property a beneficiary receives from the estate.
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Tax
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Kentucky inheritance law taxes the beneficiary of an estate based on the value of the property transferred. However, Kentucky inheritance law provides for some exemptions. The amount of inheritance tax a beneficiary must pay also depends on the relationship the beneficiary had to the decedent. Generally, closer relationships to the decedent lead to greater exemptions and lower taxes.
Classes
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Kentucky inheritance law creates three types of classes based on the beneficiary's relation to the decedent to determine inheritance tax liability. Children, parents, spouses, grandchildren and siblings of decedents make up Class A. In-laws, great-grandchildren, nieces, nephews and aunts and uncles make up Class B. Finally, all persons not in Class A or B, including cousins, fall under Class C.
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Rates
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Class A beneficiaries are exempt from paying Kentucky inheritance taxes so long as the decedent's death occurred after June 30, 1998. Class B beneficiaries do not have to pay inheritance tax on the first $1,000 they inherit, and their tax rate is between 4 and 16 percent depending on the value in excess of $1,000. The first $500 Class C beneficiaries receive is exempt from the inheritance tax, and the tax rate for the remaining value inherited is between 6 and 16 percent.
Jurisdiction
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To fall under Kentucky inheritance tax jurisdiction, the property in question must belong to a Kentucky resident or be owned by a nonresident but located in Kentucky. However, if a Kentucky resident dies with real estate in another state, that property is not subject to the Kentucky inheritance tax.
Discount
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Kentucky inheritance law provides a 5 percent discount to inheritance taxes where the beneficiary pays the tax prior to the expiration of nine months from the date of the decedent's death.
Installments
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If the beneficiary is liable for more than $5,000 in inheritance tax, she can elect to pay the inheritance tax in 10 annual equal payments. The beneficiary, however, must pay interest on the tax if she chooses to pay in installments.
Warning
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Please contact a qualified attorney licensed to practice in Kentucky or a tax professional to find out what obligations you may have with regard to Kentucky inheritance laws, which are subject to change.
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References
Resources
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