Kentucky Inheritance Tax

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What is Kentucky's Inheritance Tax?

Although Kentucky levies an inheritance tax, not everyone gets taxed. This is dependent on the familial relationship between the deceased and the beneficiaries. Generally, if the deceased is a resident of Kentucky or if he owned real and/ or tangible property in Kentucky, then his estate will be taxed. 

Who Has to Pay and Who Doesn’t

Kentucky has 3 categories to levy taxes.

Class A is close family members.  Kentucky defines close family as surviving spouses, parents, children, grandchildren, and siblings. This group will not need to pay the Kentucky inheritance tax.

Class B includes more distance family members, which are uncles, aunts, nieces, nephews, great-grandchildren, and children-in-law. They are exempt for the first $1,000 in inheritances, anything after that is taxed between 4% and 16%.

Class C includes everyone else. These people may be friends, cousins, or even corporations. The first $500 is exempted, but anything more is taxed between 6% and 16%.

Inheritance Tax Returns

Kentucky has two inheritance tax forms – short and long.  The short form is for simple and non-complicated taxed.

The estate is taxed based on its net value on the date of death. Any debts, liabilities, probate legal fees, and funeral expenses are deducted from the gross value.

Filing Rules

The executor or administrator of the estate is responsible for filing the inheritance tax return, and collecting the taxes from the inheritors. Only one tax return is required. If the executor or administrator does not file the return, then the inheritors are responsible.

The tax return must be filed within 18 months of the date of death. The taxes must be paid within that time as well. If is not paid by then, late fees and interest will be charged. If the inheritors cannot pay the taxes, the Kentucky will set up a payment plan if over $5000 is due.

If no Kentucky and federal inheritance tax is due, then the executor of estate will not need to file an inheritance tax return. Instead, he will need to file an “Affidavit of Exemption” with Kentucky’s probate court to state no tax is due.

Contacting an Attorney

If you are uncertain about your tax obligations, please consult an estate attorney. Any delays in filings will be expensive. If you would like to lower your potential inheritors’ liabilities, an estate lawyer may help you find exemptions.

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Last Modified: 06-22-2015 08:56 PM PDT

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