Inheritance and Estate Taxes are two separate taxes that are often referred to as 'death taxes' since both are occasioned by the death of a property owner. Kentucky Inheritance and Estate Tax Laws can be found under Chapter 140 of the Kentucky Revised Statutes. Definitions can be found on pages 9 and 10 of the Guide to Kentucky Inheritance and Estate Taxes.
There is no Kentucky estate tax. For more information, see page 2 of the Guide to Kentucky Inheritance and Estate Taxes.
The inheritance tax is a tax on a beneficiary’s right to receive property from a deceased person. The amount of the inheritance tax depends on the relationship of the beneficiary to the deceased person and the value of the property.
Generally, the closer the relationship the greater the exemption and the smaller the tax rate. All property belonging to a resident of Kentucky is subject to the tax except for real estate located in another state. Also, real estate and personal property located in Kentucky and owned by a nonresident is subject to being taxed.
If the inheritance tax is paid within nine months of date of decedent’s death, a 5 percent discount is allowed. The tax due should be paid when the return is filed. However, if the beneficiary’s net inheritance tax liability exceeds $5,000 and the return is filed timely, an election can be made to pay the tax in 10 equal annual installments.
The first installment is due at the time the return is filed. The portion of the tax deferred is charged with interest at the rate established by law beginning 18 months after the date of death.