Kentucky inheritance taxes are a tax on a beneficiary’s right to inherit property from a deceased person. They are levied based on the relationship between the beneficiaries and the decedent and the value of the inheritance. Inheritance taxes are different from estate taxes, which are a charge on the entire value of an estate without regard to its beneficiaries.
Beneficiaries of a deceased person are divided into three classes, and the more closely related they are to the deceased, the lower the inheritance tax rate will be. Class A beneficiaries are completely exempt from inheritance tax, while those in Class B are given a partial exemption. Those in Class C are those who do not fit into either of the other categories and are taxed at a higher rate.
How to File Kentucky Inheritance Tax?
If a beneficiary is not exempt from the Kentucky inheritance tax, he or she must file an inheritance tax return. This return must be filed 18 months after the date of death. A copy of the estate’s will, if any, and a federal estate tax return, if one was filed, must be attached to the Kentucky inheritance tax return.. Inheritor payments are due in annual installments, and a 5% discount is available for early payments.
Kentucky Inheritance Tax is imposed on all property except for real estate located in another state. This includes cash, bank accounts (even those held abroad), certificates of deposit, stocks and bonds, life insurance payable to the beneficiary, annuities, household goods, livestock and crops, vehicles, and jewelry. Kentucky Inheritance Tax is levied at rates ranging from 4% to 16%. However, a 5 percent discount is allowed if the inheritance tax is paid within nine months of the date of death.
How to Avoid Kentucky Inheritance Tax?
If you have inherited money or real estate in Kentucky, you may be required to pay inheritance taxes. These taxes are based on how closely you were related to the deceased person and the value of what you received. However, you can avoid paying inheritance taxes by planning ahead and using estate planning instruments like trusts.
The first $500 of your inheritance is exempt from Kentucky’s inheritance tax, and anything above that is taxed at rates between 4% and 16%. You can also avoid inheritance taxes by donating some of your inheritance to charity. In addition, you can reduce your inheritance taxes by filing a return within nine months of the decedent’s death.