Kentucky is one of the few states that implement dower and curtesy laws, which are a relic of past U.S. inheritance law policies. That same distinction of rarity applies to its inheritance tax, as only five other states levy it. Below we provide comprehensive information on Kentucky inheritance laws. But if you’re looking for hands-on guidance, the SmartAdvisor tool will pair you with up to three financial advisors in you area, so you can get some help navigating the waters of distributing an estate’s assets.
Does Kentucky Have an Inheritance Tax or Estate Tax?
Although Kentucky is one of just a handful of states in the U.S. that include an inheritance tax in its laws, certain heirs won’t have to pay it, depending on their relationship with the decedent. This is determined by which “class” an heir falls into. The classes are defined as follows:
|Kentucky Inheritance Tax|
|Class||Who it Includes||Tax Rates and Exemptions|
|Class A||– Children, spouse, parents, siblings and grandchildren||– Completely exempt from all inheritance taxes|
|Class B||– Aunts, uncles, nephews, nieces, great-grandchildren||– Exempt up to $1,000 |
– Rates range from 4% to 16%
|Class C||– Cousins, friends, organizations and anyone else outside of Classes A & B||– Exempt up to $500 |
– Rates range from 6% to 16%
This inheritance tax is only levied against the estates of residents and nonresidents who own property in Kentucky. It must be filed within 18 months of the individual’s death, though filing it early has its perks. If you can manage to pay off the entire inheritance tax prior to nine months passing since the death, the Kentucky Department of Revenue will apply a 5% discount. You might even find yourself eligible for an installment plan to help you pay it off gradually. Those who file late may face a penalty tax.
There is no estate tax in Kentucky.
Other Necessary Tax Filings
Paying the Kentucky inheritance tax is just the first step in the process of managing all the various tax implications that come during and following the distribution of an estate. Be sure to keep the following in mind:
- Final individual federal and state income tax returns – each due by tax day of the year following the individual’s death
- Federal estate/trust income tax return – due by April of the year following the individual’s death
- Federal estate tax return – due nine months after the individual’s death, though an automatic six-month extension is available if asked for prior to the conclusion of the nine-month period
- This is required only of individual estates that exceed a gross asset and prior taxable gift value of $11.4 million
Before you worry about actually filing, don’t forget to apply for an employer identification number from the IRS. This is essentially a social security number for an estate, and applications are available online, or by fax and mail.
Dying With a Will in Kentucky
Maintaining control over who inherits your assets and property is often the last form of personal control that a decedent will get before he or she passes away. This can only be accomplished if you create a valid, or testate, will in the eyes of Kentucky inheritance law. To ensure that your will receives this distinction, you must sign your own will, along with the signatures of two witnesses who saw you sign it. Kentucky inheritance laws do allow someone to sign for you if you physically cannot.
A sometimes-overlooked part of a testate will is the choosing of an executor who’s tasked with managing your final expenses, leftover debts and the actual distribution of your property to its heirs. This vital job is typically given to someone who’s familiar with you and your family.
Dying Without a Will in Kentucky
Kentucky estates that lack a valid will, or a will at all, are left up to the mercy of state intestate succession laws. These statutes are designed to divvy up your personal and real property between your spouse, children parents, siblings and more, depending on who survives you. The courts of Kentucky will almost assuredly name an executor to handle the estate’s affairs.
When it comes to property distinctions, it’s important to know what falls under the umbrellas of personal property and real property because different individuals will be entitled to it. Real property is everything that encompasses real estate, like a home and land. On the other hand, cars, furniture and all other belongings are considered to be personal property.
The Probate Process in Kentucky Inheritance Law
Because decedents are no longer alive to distribute the property in their estates, the probate court process was developed to ensure no fraud occurs. More specifically, if there’s a testate will, the court is focused on following the exact wishes of the decedent. But when someone dies intestate, the intestate succession laws of Kentucky are used in their place. So your estate will go through one of these three probate options:
- Formal settlement – This type of probate proceeding requires the highest level of court observation, and can be expensive.
- Informal settlement – The court will still maintain some level of oversight during informal probate, though it typically only comes to light when an inheritance issue arises.
- Small estate – For estates with under $15,000 in personal property, there is essentially no probate necessary, so long as a small estate affidavit is filed with the court. This does not include estates with real property.
Spouses in Kentucky Inheritance Law
The dower and curtesy laws of Kentucky are now somewhat antiquated, as they have survived from a time where the husband was the sole breadwinner of the household. They are essentially built to protect a surviving spouse in the event that his or her partner dies intestate.
More specifically, a spouse is entitled to half of the decedent’s real property and personal property in this situation, according to Kentucky inheritance laws. The balance of whatever’s left over is split among the decedent’s parents, siblings or children (regardless of whether those children are the product of the decedent’s marriage with his or her spouse). But if none of those relatives survive the decedent, the entire estate is awarded to the spouse.
For those who are married at the time of their death, there are only two scenarios that could eliminate your spouse from remaining a viable heir, according to Kentucky inheritance laws:
- Divorce – Though it might seem obvious, a divorce instantaneously removes your spouse as an eligible heir to the property of your intestate and testate estate. If you get divorced, it’s recommended you draft a new will anyway.
- Adultery – As far as Kentucky is concerned, if your spouse cheats on and leaves you, the spouse forfeit any possibility of inheritance. The only way this can be overturned is if you live together as a couple following a reconciliation.
Children in Kentucky Inheritance Law
If a decedent is survived solely by children, those children are afforded the entirety of the intestate estate, according to Kentucky inheritance laws. Other than that, the children are given half of the estate if their deceased parent was married at the time of his or her death, according to dower and curtesy laws.
|Intestate Succession: Spouses & Children|
|Inheritance Situation||Who Inherits Your Property|
|– If spouse, but no children, parents or siblings||– Entire estate to spouse|
|– If spouse and children||– 1/2 of personal property to spouse |
– 1/2 of real property to spouse
– Balance split evenly among children
|– If spouse and parents, but no children||– 1/2 of personal property to spouse |
– 1/2 of real property to spouse
– Balance split evenly among parents
|– If spouse and siblings, but no children and parents||– 1/2 of personal property to spouse |
– 1/2 of real property to spouse
– Balance split evenly among siblings
|– If children, but no spouse||– Entire estate to children|
If you adopt a child, he or she retains the same inheritance rights as any biological child you might have, according to Kentucky inheritance laws. However, stepchildren and foster children are not afforded automatic rights to inherit your intestate estate, that is unless you personally adopt them. Grandchildren are only inducted into this direct heir group if the decedent’s child (their parent) predeceased them.
Children that are born outside of wedlock do not lose the ability to inherit from their parents. To ensure that both parents contribute to this, paternity must be established scientifically or by admission of the father.
So long as a child was conceived before and born within 10 months of his or her parent’s death, that child is eligible to inherit from the decedent’s intestate estate, according to Kentucky inheritance laws.
Unmarried Individuals Without Children in Kentucky Inheritance Law
The dower and curtesy laws of Kentucky do not apply if a decedent was unmarried, as there is no spouse for whom to leave assets. So in the event that you die intestate, and without children and a spouse, this is how the state of Kentucky will pass down your property:
|Intestate Succession: Extended Family|
|Inheritance Situation||Who Inherits Your Property|
|– If parents, but no children or spouse||– Entire estate to parents|
|– If no parents||– Estate split evenly among siblings|
|– If no siblings||– Estate split evenly among paternal/maternal grandparents|
|– If no grandparents||– Estate split evenly among paternal/maternal aunts and uncles|
|– If no aunts and uncles||– Estate split evenly among paternal/maternal great-grandparents|
|– If no great-grandparents||– Estate split evenly among paternal/maternal great-aunts and great-uncles|
An estate will escheat into the state of Kentucky’s property when there are no other suitable heirs found through intestate succession. This is very unlikely considering how deep into your family tree the laws go, but it’s still a distinct possibility.
Non-Probate Kentucky Inheritances
Probate can sometimes be an incredibly complex process, as the court system is tasked with managing the complete inheritance of your estate based on either your will or intestate succession law. The assets listed below, though, do not pass through probate, as they traditionally have a chosen beneficiary:
- Dower and curtesy property
- Retirement accounts, like IRAs
- Joint tenancy real property
- Payouts for life insurance
- Living trusts
- Transfer-on-death investment accounts
- Pay-on-death bank accounts
Other Situations in Kentucky Inheritance Law
Non-U.S. citizens and illegal aliens have the exact same rights of inheritance as any citizen or legal resident, according to Kentucky inheritance laws. This policy applies to both heirs and those who’ve died.
Most states will allow half-blood heirs to inherit as if they’re full-blood relatives. However, Kentucky inheritance laws hold half-blooded relatives to half the inheritance.
Kentucky’s “Mandy Jo’s Law” states that parents who abandon their children based on personal choice will lose all rights to that child’s intestate estate. There are two ways a parent can redeem these rights, including resuming care of the child for as little as one year before his or her death and following courts orders for child support during their life.
Resources for Estate Planning
Managing your own estate, or handling the intricacies of inheriting money from the estate of a loved one who has passed away, includes many complex factors to take into account, including thorough understanding of Kentucky inheritance laws. It can be such an overwhelming venture, with taxes to file, possible court proceedings to go through and more.
The SmartAsset financial advisor matching tool will pair you with as many as three nearby financial advisors equipped to handle your estate and inheritance planning needs. Matches are found based on your answers to a few simple questions, so take your time when stating what you’re looking to have handled.
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