Kentucky Inheritance Tax Cases
Last updated: 16 Oct 2025 •
Kentucky Inheritance Tax — Case Notes & Practitioner Commentary
Kentucky’s inheritance tax is statute-driven. There are comparatively few modern appellate opinions squarely on point; practice relies heavily on KRS Chapter 140, Department of Revenue (DOR) guidance, and probate decisions that affect deductions and timing. Below are the most important authorities & issues organized like “case notes.”
Beneficiary Classes Control Liability (KRS 140.070–.080)
What it’s about
Inheritance tax in Kentucky is assessed per beneficiary. Class A (spouse, lineal ascendants/descendants) is fully exempt; Class B and Class C have small exemptions and graduated rates.
Rule / Practice effect
Classification drives liability regardless of the overall estate size. Mixed-beneficiary estates often owe tax solely on B/C takers even where most assets pass to Class A.
Comment
Verify relationships precisely (adoption, step-relations, in-laws). Title and beneficiary designations can shift who lands in which class, changing tax dramatically.
Business Situs of Intangibles (Nonresidents) (KRS 140.010)
What it’s about
Nonresidents are generally taxed only on Kentucky real and tangible property. Intangibles (stock, cash, brokerage) are usually excluded unless they acquire a business situs in Kentucky.
Rule / Practice effect
Evidence of a Kentucky business situs (e.g., integral to a KY business, managed/used here) can pull an intangible into the taxable base for nonresidents.
Comment
Document where decisions and control occur. For closely held interests, memorialize operating agreements and management location to avoid unintended KY situs.
“No Tax Due” and Affidavit of Exemption (KRS 395.605)
What it’s about
When transfers are entirely to Class A beneficiaries, DOR permits a simplified process (No Tax Due return) and courts often accept an Affidavit of Exemption.
Rule / Practice effect
Proper use of the affidavit can expedite probate and recording. It does not apply if any portion passes to Class B/C or a non-qualifying entity.
Comment
Audit the chain of title and beneficiary designations: even small specific bequests to a Class C friend can void “No Tax Due” status.
Early-Payment Discount & Installments (KRS 140.220–.222)
What it’s about
Inheritance tax paid within 9 months may earn a 5% discount. If a beneficiary’s net tax exceeds $5,000, they may qualify for up to 10 annual installments (interest applies).
Rule / Practice effect
Discount timing is strict; installments are by beneficiary, not by estate. Plan liquidity beneficiary-by-beneficiary.
Comment
In nonresident cases with one Kentucky asset, escrow at closing can secure discount timing while paperwork completes.
Administration Expenses & Probate Timing (Practice)
What it’s about
Allowance of administration expenses depends on probate court recognition and proper documentation. Late or disallowed claims can reduce deductions and increase tax on B/C beneficiaries.
Rule / Practice effect
Track creditor-claim windows and court approvals. Deductions should be supported by orders, invoices, and proof of payment.
Comment
Coordinate with probate counsel to time filings so deductible items are preserved before the return or amended in time.
References
- Kentucky Department of Revenue — Inheritance & Estate Tax portal: revenue.ky.gov
- DOR — A Guide to Kentucky Inheritance & Estate Taxes (92F101): PDF
- KRS 140.010 — Property subject to tax; business situs of intangibles: Statute
- KRS 140.070 — Exemptions and rates by class: Statute
- KRS 140.080 — Definitions/relationships affecting class: Statute
- KRS 140.220 — Discounts for prompt payment: Statute
- KRS 140.222 — Installment payments by beneficiary: Statute
- Form 92A200 — Kentucky Inheritance Tax Return: PDF
- Form 92A201 — No Tax Due Return: PDF
- KRS 395.605 — Affidavit of Exemption (probate): Statute