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AN ACT relating to inheritance and estate taxes. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 140 IS CREATED TO 3
READ AS FOLLOWS: 4
The taxes imposed by this chapter shall only apply to deaths occurring prior to August 5
1, 2024. 6
Section 2. KRS 140.010 is amended to read as follows: 7
For deaths occurring prior to August 1, 2024, all real and personal property within the 8
jurisdiction of this state and any interest therein belonging to inhabitants of this state, all 9
tangible personal property wherever situated belonging to inhabitants of this state that has 10
not acquired a situs for purposes of taxation outside of this state, all intangible property 11
belonging to persons domiciled in this state except partnership property located in 12
another state which is subject to an inheritance or estate tax in that state, all intangible 13
property belonging to nonresidents that has acquired a business situs in this state, all real 14
property or interest therein within this state and all tangible personal property that has 15
acquired a situs in this state and is not taxable elsewhere belonging to persons who are 16
not inhabitants of this state, which shall pass by will or by the laws regulating intestate 17
succession, or by deed, grant, bargain, sale or gift made in contemplation of death or 18
made or intended to take effect in possession or enjoyment at or after the death of the 19
grantor or donor, absolutely or in trust, to any person or to any body politic or corporate, 20
in trust or otherwise, or by reason whereof any person or body politic or corporate shall 21
become beneficially entitled in possession or expectancy to any property or to the income 22
thereof, is subject to a tax upon the fair cash value as of the date of the death of the 23
grantor or donor of the property in excess of the exemptions granted and at the rates 24
prescribed in this chapter. This tax shall be imposed when any such person or corporation 25
becomes beneficially entitled in possession or expectancy to any property or the income 26
thereof by any such transfer. 27 UNOFFICIAL COPY 24 RS BR 832
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Section 3. KRS 140.020 is amended to read as follows: 1
For deaths occurring prior to August 1, 2024: 2
(1) The terms of this chapter shall apply to any property or interest therein, of which 3
the decedent has made a transfer by trust or otherwise, in contemplation of or 4
intended to take effect in possession or enjoyment at or after death, including a 5
transfer under which the transferor has retained for his or her life or any period not 6
ending before his or her death (a) the possession or enjoyment of, or the income 7
from the property; or (b) the actual or contingent power to designate the persons 8
who shall possess the property or the income therefrom, except in the case of a bona 9
fide sale for an adequate and full consideration in money or money's worth. It shall 10
further apply to any property conveyed in trust over which the settlor has a power 11
of revocation exercisable by will. 12
(2) Every transfer made within three (3) years prior to the death of the grantor, vendor 13
or donor of a material part of the [his] estate, or in the nature of a final disposition 14
or distribution thereof, and without an adequate valuable consideration, shall be 15
construed prima facie to have been made in contemplation of death within the 16
meaning of this chapter. If a transfer was made more than three (3) years prior to 17
the death of the decedent it shall be a question of fact, to be determined by the 18
proper tribunal, whether the transfer was made in contemplation of death. 19
(3) There shall be no presumption of contemplation of death as to certificates of deposit 20
jointly owned and all such certificates of deposit shall be taxed pursuant to KRS 21
140.050. 22
Section 4. KRS 140.030 is amended to read as follows: 23
For deaths occurring prior to August 1, 2024: 24
(1) If it appears, either from the will of the decedent or from extrinsic evidence, that an 25
obligation of a contractual nature exists in favor of any person payable at or after 26
death of the decedent, the sum so payable shall be treated for the purposes of this 27 UNOFFICIAL COPY 24 RS BR 832
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chapter as a taxable transfer, unless it affirmatively appears by competent evidence 1
that a consideration substantially equivalent in value to the amount due under the 2
contract was paid or furnished by or for the other party thereto during the life of the 3
decedent. 4
(2) The proceeds payable under any life insurance policy on the death of the assured 5
(other than a United States government life insurance policy or national service life 6
insurance policy issued by or through the federal government), payable to the 7
assured or the [his] estate, shall be taxable as a part of the legacy as a distributable 8
share of the beneficiary. The proceeds of an insurance policy payable to a 9
designated beneficiary, including a testamentary or inter vivos trustee, other than 10
the assured or the[his] estate, shall be tax-free. The proceeds payable under any 11
United States government life insurance policy or national service life insurance 12
policy issued by or through the federal government, whether payable to a 13
designated beneficiary or to the assured or the[his] estate, and any pension or 14
annuity payments made or to be made to the surviving spouse of an employee of a 15
railroad or other carrier under the Federal Railroad Retirement Act of 1935 as 16
amended, shall be tax-free, and shall not be considered in determining the value of 17
any taxable transfer. 18
Section 5. KRS 140.040 is amended to read as follows: 19
For deaths occurring prior to August 1, 2024: 20
(1) Whenever any person shall exercise a power of appointment derived from any 21
disposition of property (whether by will, deed, trust agreement, contract, insurance 22
policy or other instrument) regardless of when made, such appointment shall be 23
deemed a transfer taxable under the provisions of this chapter in the same manner 24
as though the property to which such appointment relates belonged absolutely to the 25
donee of such power and had been bequeathed or devised by such donee by will; 26
and whenever any person possessing such a power of appointment so derived shall 27 UNOFFICIAL COPY 24 RS BR 832
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omit or fail to exercise the same in whole or in part, within the time provided 1
therefor, a transfer taxable under the provisions of this chapter shall be deemed to 2
take place to the person or persons receiving such property as a result of such 3
omission or failure to the same extent that such property would have been subject to 4
taxation if it had passed under the will of the donee of such power. The time at 5
which such transfer shall be deemed to take place, for the purpose of taxation, shall 6
be governed by the provisions of subsections (2) to (4) of this section. 7
(2) In the case of a power of appointment which passes to the donee thereof at the death 8
of the donor, under any instrument, and if the donor dies on or after April 24, 1936, 9
the transfer shall be deemed to take place, for the purpose of taxation, at the time of 10
the death of the donor and the assessment be made at that time against the life 11
interest of the donee and the remainder against the corpus. The value of the 12
property to which the power of appointment relates shall be determined as of the 13
date of the death of the donor and shall be taxed at the rates and be subject to the 14
exemptions in effect at the death of the donor. The determination of the applicable 15
rates and exemptions (in effect at the death of the donor) shall be governed by the 16
relationship of the beneficiary to the donee of the power of appointment. In the 17
event the payment of the tax at the death of the donor should operate to provide an 18
exemption for any beneficiary of a donee not authorized by KRS 140.080, then 19
such exemption shall be retrospectively disallowed at the time of the death of the 20
donee. It is further provided that the remainder interest passing under the donee's 21
power of appointment, whether exercised or not, shall be added to and made a part 22
of the distributable share of the donee's estate for the purpose of determining the 23
exemption and rates applicable thereto. 24
(3) In all cases other than that described in subsection (2) of this section the transfer 25
shall be deemed to take place, for the purpose of taxation, at the time of the death of 26
the donee. In such cases, the value of the property to which the power of 27 UNOFFICIAL COPY 24 RS BR 832
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appointment relates shall be determined as of the date of the death of the donee and 1
shall be taxed at the rates and be subject to the exemptions in effect at the death of 2
the donee. The determination of the applicable rates and exemptions (in effect at the 3
death of the donee) shall be governed by the relationship of the beneficiary to the 4
donee of the power of appointment. 5
(4) The provisions of subsection (2) of this section shall not preclude the taxation, at 6
the death of the donee, of any transfer made by means of a power of appointment if 7
such transfer was not in fact reported to or a tax assessed thereon by the Department 8
of Revenue within the period of limitation prescribed by KRS 140.160. If the 9
transfer by the power of appointment is not so reported or a tax assessed thereon, 10
the period of limitation prescribed in KRS 140.160 shall not begin to run until the 11
death of the donee of such power. 12
(5) The amendments to this section, adopted by the 1948 General Assembly, shall 13
apply to all powers of appointment whether created before or after the effective date 14
of said amendments. It is the declared intention of the General Assembly to impose 15
a tax upon every transfer of property by means of a power of appointment, 16
regardless of when or how created, and it is the declared intention of the General 17
Assembly that the use of the power of appointment device shall not permit the 18
transfer of property, to which such a power relates, to escape thereby the payment 19
of state inheritance taxes. 20
Section 6. KRS 140.050 is amended to read as follows: 21
For deaths occurring prior to August 1, 2024, whenever any real or personal property is 22
held jointly in the names of two (2) or more persons, or as tenants by the entirety, or is 23
deposited in banks or other depositories jointly in the names of two (2) or more persons 24
and is payable to either or to the survivor upon the death of the other, the right of the 25
surviving tenant by the entirety or the surviving joint tenant or joint depositor to the 26
immediate ownership or possession and enjoyment of the property shall be deemed a 27 UNOFFICIAL COPY 24 RS BR 832
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transfer of one-half (1/2) or other proper fraction thereof, taxable under the provisions of 1
this chapter in the same manner as though the part of the property to which the transfer 2
relates belonged to the tenants by the entirety, joint tenants or joint depositors as tenants 3
in common, and had been bequeathed or devised to the surviving tenant by the entirety, 4
joint tenant or joint depositor by the deceased tenant by the entirety, joint tenant or joint 5
depositor. 6
Section 7. KRS 140.110 is amended to read as follows: 7
For deaths occurring prior to August 1, 2024: 8
(1) In the case of estates in expectancy which are contingent or defeasible, a tax shall 9
be levied at the rate which, on the happening of the most probable contingencies or 10
conditions named in the will, deed, trust agreement, contract, insurance policy, or 11
other instrument, would be applicable under the provisions of this chapter. Moneys 12
so collected shall be distributed as are other inheritance tax funds. If the property so 13
taxed shall ultimately vest in possession in persons taxable at a lower rate, or in a 14
person or a corporation exempt from taxation by this chapter, upon application by 15
such beneficiary to the Department of Revenue for refund of any excess tax, the 16
Department of Revenue, after investigation, shall certify to the Finance and 17
Administration Cabinet the amount of such refund. The Finance and Administration 18
Cabinet shall refund such excess payment of tax in the same manner as other 19
refunds are made. 20
(2) Where an estate or interest can be divested by the act or omission of the legatee or 21
devisee, it shall be taxed as if there were no possibility of divesting. 22
Section 8. KRS 140.120 is amended to read as follows: 23
For deaths occurring prior to August 1, 2024, if a testator bequeaths or devises property 24
to one (1) or more personal representatives or trustees in lieu of their commissions or 25
allowances, or makes them his or her legatees to an amount exceeding the commissions 26
or allowances prescribed by law, the excess in value of property so bequeathed or devised 27 UNOFFICIAL COPY 24 RS BR 832
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above the amount of commissions or allowances prescribed by law in similar cases shall 1
be taxable. 2
Section 9. KRS 140.230 is amended to read as follows: 3
For deaths occurring prior to August 1, 2024: 4
(1) When any interest in property less than an estate in fee is devised or bequeathed to 5
one or more beneficiaries with remainder to others, and the interest of one or more 6
beneficiaries is subject to any of the taxes levied by this chapter, the personal 7
representative shall deduct the tax upon such taxable interests from the whole 8
property thus devised or bequeathed. Whenever property other than money is so 9
devised or bequeathed the personal representative[he] may, unless the taxes upon 10
all the taxable interests are paid by the beneficiaries when due, be authorized to sell 11
the property or such portion thereof as may be necessary, as provided in KRS 12
140.220, and having deducted the unpaid taxes on the taxable interests from the 13
proceeds of the sale, the personal representative[he] shall account for the balance 14
in lieu of the property sold, as in other cases. 15
(2) If a legacy subject to the tax is charged upon or payable out of real property, the 16
heir or devisee, before paying the legacy, shall deduct the tax therefrom and pay it 17
to the personal representative or trustee. The payment of this tax shall be enforced 18
in the same manner as the payment of a tax on a direct legacy could be enforced. 19
Section 10. KRS 140.270 is amended to read as follows: 20
For deaths occurring prior to August 1, 2024: 21
(1) In the absence of administration in this state upon the estate of a nonresident, the 22
Department of Revenue, at the request of a personal representative duly appointed 23
and qualified in the state of the decedent's domicile, or of a grantee under a 24
conveyance made during the grantor's lifetime, and upon satisfactory evidence 25
furnished by the personal representative or grantee, or otherwise, may determine 26
whether or not any property of the decedent within this state is subject to the 27 UNOFFICIAL COPY 24 RS BR 832
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provisions of this chapter. If so, the department may determine the amount of tax 1
and adjust the same with the personal representative or grantee, and for that purpose 2
may appoint an appraiser to appraise the property. The expense of appraisal shall be 3
charged upon the property in addition to the tax. The department's certificate of the 4
amount of tax and its receipt for the amount therein certified may be filed with the 5
county judge/executive of the county where the property is located, and when so 6
filed shall be evidence of the payment of the tax to the extent of such certification. 7
When the tax is not adjusted within six (6) months after the death of the decedent, 8
the proper District Court, upon application of the department, shall appoint an 9
administrator in this state. 10
(2) When evidence of ownership of intangible personal property belonging to a 11
nonresident decedent is found to be physically located in this state, the Department 12
of Revenue shall so inform the state official collecting death tax in the state of 13
domicile of the decedent, if that state furnishes like information to the Department 14
of Revenue of this state in a reciprocal manner. 15
Section 11. The following KRS sections are repealed: 16
140.130 Levy of estate tax -- Computation -- Payment -- Administration. 17
140.140 Payment of estate tax under protest -- Action to recover -- Refund. 18