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Kentucky Inheritance Tax Exemptions

Beyond who you are to the decedent, a handful of asset-specific rules shield certain property from this tax entirely.

KRS §140.015, §140.060, §140.063, §140.080

By the FigureMyTax Editorial Team · Reviewed 2026 · How we calculate

Quick answer: a special spousal marital election, military death benefits, certain retirement accounts, and charitable transfers all escape this tax, on top of the class-based rates in Rates & Who Pays.

A spousal election that predates federal portability

Confirmed current, straight from the statute: the personal representative may elect to include the entire value of any trust or life estate in a form that qualifies for the federal estate tax marital deduction, as that rule existed through December 31, 1984, regardless of whether a federal marital deduction is actually elected. This election has to be made in the form the Department of Revenue prescribes, by the return's due date (including extensions).

Military death benefits are exempt

Benefits from the federal government arising out of military service are specifically exempt from Kentucky inheritance tax under KRS 140.015, separate from and in addition to whatever class exemption the beneficiary might otherwise have.

Certain retirement accounts get their own exemption

Annuities or other payments under employees' trusts, retirement annuities, and individual retirement bonds, accounts, and annuities have a dedicated exemption under KRS 140.063 — worth checking carefully against the specific account type involved, since not every retirement vehicle is treated identically.

Charitable, educational, and religious transfers are exempt

Transfers to educational, religious, or charitable institutions, societies, or associations, and to cities, towns, or public institutions, are exempt under KRS 140.060 — separate from Class C, which covers non-qualifying institutions and organizations that don't meet this exemption's requirements.

Facing probate in Kentucky?

A local probate attorney can review your estate — many offer a free consultation.

Talk to a Kentucky attorney

Life insurance proceeds also receive specific treatment under KRS 140.030 — have a Kentucky attorney confirm exactly how a given policy's proceeds are classified for your situation.

Exemptions — frequently asked questions

What is the special spousal election under KRS 140.080?

A personal representative can elect to treat the surviving spouse's entire interest in a qualifying marital trust or life estate as exempt, using the federal marital deduction rules as they existed through 1984, regardless of whether a federal marital deduction is actually claimed.

Are military death benefits exempt from Kentucky inheritance tax?

Yes — benefits from the federal government arising out of military service are specifically exempt under KRS 140.015.

Are retirement accounts exempt?

Certain annuities or payments under employees' trusts, retirement annuities, and individual retirement bonds, accounts, and annuities have a specific exemption under KRS 140.063.

Are charitable bequests exempt in Kentucky?

Yes — transfers to educational, religious, or charitable institutions, and to cities or public institutions, are exempt under KRS 140.060.

Keep going

Kentucky Inheritance Tax CalculatorYour estimate, based on your answers Kentucky Inheritance Tax: Rates & Who PaysThe full class breakdown, explained Do I Owe KY Inheritance Tax If I Live Out of State?Why it follows the decedent, not you Kentucky Small Estate Affidavit CheckerDoes this estate qualify?

This page provides general guidance only and is not legal or tax advice. Based on KRS §140.015, §140.060, §140.063, §140.080. Confirm current figures with the Kentucky Department of Revenue or a licensed attorney before acting.